Good morning. Here’s what you need to know as markets get underway on Thursday.
First, the scoreboard (8:15am AEDT):
Dow: 21,112 +303 +1.5%
S&P 500: 2,395 +31 +1.3%
SPI 200 Futures (March – delayed pricing): 5,735 +52,5 (+0.9%)
AUD/USD: 0.7676 +0.0020 +0.26%
1. Australian treasurer’s task: The core task remains to increase what hard working Australians can earn. This means generating more hours and more jobs in our economy. You can’t achieve this outcome without growth and business investment, treasurer Scott Morrison said in an article he penned for Business Insider.
We cannot be complacent and rely on commodity prices remaining at current levels to do the hard work. We cannot base our budgets and economic plans on volatile commodity prices. We must continue to take the necessary steps to keep our expenditure under control, to boost investment, to maintain our AAA-credit rating and ensure that we are able to sustainably fund necessary government services not just now but in the future, he said.
2. Stocks up: Futures are pointing to a higher open for Australian stocks. Traders will be buoyed by the rally in US stocks. The Dow crossed 21,000 for the first time in history bolstered by president Donald Trumps speech to Congress. He reaffirmed his plans to cut corporate taxes and embark on huge infrastructure investments. Most commentators shared the view that Trump’s speech was a success and the delivery of his message was clear, which increased optimism in the market that he has the ability to execute his policies effectively.
3. Data today: Australia reports January data for international trade in goods and services (net imports/exports) and building approvals. The US has February jobless claims.
4. Bonds slump: US Treasury yields rose following Trump’s speech and the increased expectation of a Fed rate hike in March. Two-year yields reached a high of 1.308%, their highest level since August 2009. Federal Reserve committee member Robert Kaplan repeated his view that the Fed should begin the rate rise process sooner to allow for a more gradual increase over time. At the beginning of the week, markets had priced in a 35-40% chance of a rate increase in March, but that likelihood has now increased to 65-70%.
5. Aussie dollar is resilient: The Q4 GDP report and Trump’s speech to Congress failed to move the Aussie dollar much in either direction yesterday, and it’s remained steady in overnight trading. The dollar benefited from a strong Australian Q4 GDP growth report yesterday and renewed expectations for global growth following big gains in share markets. The strength in the Aussie dollar was reflected in its performance against the USD overnight following a spike in US bond yields.
6. Iron ore goes nowhere: The spot price for benchmark 62% fines fell by just one cent to $91.26 a tonne, according to pricing from Metal Bulletin. It was a little more lively for lower grade ores with the price for 58% fines sliding by five cents to $64.75 a tonne. “The iron ore market returned to relative stability today following a prolonged period of volatility,” said analyst at Metal Bulletin. And that trend looks set to continue on Thursday, with Chinese futures doing little overnight, at least compared to usual standards.
7. Ray Dalio steps down: Ray Dalio, who oversees the world’s biggest hedge fund firm, is stepping down from management amid a company-wide shakeup. Dalio will stop managing Bridgewater Associates by mid-April, according to a client note Wednesday reviewed by Business Insider. Dalio said in the note that he had “temporarily stepped back into management” ten months ago to help transition Greg Jensen’s co-CEO role. Dalio will remain co-chief investment officer along with Bob Prince and Greg Jensen.
8. Chinese rich doing it good under Trump: The richest people in China have seen their fortunes soar since Donald Trump’s shock election win in November last year, according to a report from Bloomberg. Since Trump’s November 8 win, the 36 Chinese billionaires tracked by the Bloomberg Billionaires Index have seen their wealth climb 13.2%, a $US39.2 billion bump that puts their combined wealth at $US336 billion.
9. The best short out there is retail: Traditional retail has been extremely profitable for short sellers in 2017, according to a note from financial analytics firm S3 Partners.
In a note sent out to clients on Tuesday, S3’s head of research, Ihor Dusaniwsky, said that the top five most profitable short trades in multi-line retail so far this year are all traditional brick and mortar retailers who “depended on strong foot traffic and higher margins to support their infrastructure and staff are being forced to find ways to cut costs, increase margins and eliminate underperforming locations.”
10. Snap prices IPO: It’s official: Snapchat parent company Snap Inc. just raised $US3.4 billion in the tech industry’s largest initial public offering in over two years. Snap sold 200 million shares at $US17 apiece, according to multiple reports. It had aimed to raise $US3.2 billion by offering 200 million shares at between $US14 and $US16 — or at a valuation of up to $US22 billion.
Here’s a bonus:
Aussie pop star Holly Valance has been dragged into bizarre “blackmail” claims in a £132 million lawsuit