10 things you need to know before markets open in Australia and Asia

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Good morning. Here’s what’s happening as Wednesday begins in a wet Sydney

First, the scoreboard (7:50am AEDT):
• Dow: 20071 +19 (+0.09%)
• S&P 500: 2291 -1.7 (-0.09%)
• SPI 200 Futures (March): 5,570 +10 (+0.2%)
• AUD/USD: 0.7632 -0.0027 (-0.4%)

And the news.

1. US markets yo yo: The Dow Jones Industrial Average raced to a record high, on speculation President Donald Trump’s administration would spell out spending and tax plans, only to fade in afternoon trading. Treasuries reversed losses, sending the 10-year yield below 2.40%. Central banks set the direction for currencies, with a Federal Reserve’s Patrick Harker signalling that rates may rise in March boosting the dollar. The comment by Bank of England policy maker Kristin Forbes that inflation could exceed expectations sent the pound surging. Australian shares are set to drift at open with the main focus Rio Tinto not releasing earnings until after market concludes. Still, investors may take comfort from rising iron ore prices.

2. Nikko AM expects Australian share returns to increase: Head of Australia equities, Brad Potter thinks the marketpoised to have a stronger year than 2016 thanks to resurgent commodity prices and the potential for bank stocks to rally further. Potter believes the market could beat last year’s figure by as much as 3%, to finish the 2017 at 15%, based on a dividend yield expectation of 4.5% and earnings per share growth in the high single digits. The nation’s banks, despite their recent rally, are still relatively cheap, Potter said, given they are expected to cut costs and benefit from rising global inflation.

3. Data today:
Japan posts foreign exchange reserves. Japan also has current account and bank lending. US has petroleum status report.

4. Company news: Rio Tinto and Cimic posts earnings. Carlyle Group and Time Warner are among US companies to release earnings.

5. There’s another Trump spat, this time over financial rules:
The US president set off yet another international spat — this time in the normally moribund arena of financial regulation. ECB president Mario Draghi took issue with the Trump administration’s declared intention to repeal post-financial-crisis regulations on large US banks, whose destabilisation can and have caused global problems.

6. Aussie dollar goes ugh: The AUD, having pushed higher following the release of the RBA’s February monetary policy statement on Tuesday, did an abrupt about-face in overnight trade, slumping to as low as .7602 on the back of renewed, and rampant, US dollar strength. It’s recovered in recent trade, but is still lower for the session.

7. Iron ore spikes:
Out of nowhere, and after two days of heavy losses, prices exploded higher led by another enormous move in Chinese futures. The spot price for benchmark 62% fines surged by 3.34% to $83.29 a tonne, according to Metal Bulletin, completely reversing the decline reported in the previous two sessions.

8. Macquarie’s iron ore warning:
Macquarie sees a declining need for iron ore from higher-cost seaborne suppliers who returned to the market in 2016, in addition to a decline in iron ore needed from domestic Chinese mines. The latest update to the bank’s iron ore supply model shows a 17 million tonne decline in seaborne iron ore supply outside of the major and mid-tier suppliers. This means iron ore prices should tumble below US$60 a tonne in the second quarter of 2017, Macquarie says.

9: Hedge fund’s winning strategy: A strategy run by Renaissance Technologies, the secretive multi-billion hedge fund firm, is attracting fresh money. Its Renaissance Institutional Equity Fund (RIEF) grew by about $4 billion in 2016, ending the year with $14.9 billion after starting 2016 with about $10.9 billion, according someone familiar with it. Most of that increase is from performance, as the fund returned 21.5% last year, equal to about $2.35 billion in gains.

Still, a rough calculation shows that the fund probably took in about $1.6 billion in new money in 2016. The capital raise comes at a time when many hedge funds are struggling to attract new money. Separately, Rebecca Patterson, the chief investment officer of $100 billion manager Bessemer Trust, the three risk factors she worries most about are bond market volatility surrounding Federal Reserve appointments, the French election, and Russia’s involvement in Europe.

10. Recession-style event propping up US economy:
The Federal Reserve’s latest quarterly survey of lending conditions showed a tightening of standards in some sectors that suggests banks are already retrenching, even as the central bank considers additional interest rate increases.

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