Good morning. Here’s what’s happening as Wednesday begins and the world’s largest migration begins ahead of the Lunar New Year festivities.
First, the scoreboard: (7:45am AEDT)
• Dow: 19922 +122 (+0.6%)
• S&P 500: 2277 +15 (+072%)
• SPI 200 Futures (March): 5,634 +50 (+0.9%)
• AUDUSD: 0.7583 -0.0001 (-0.01%)
1. Data Today: The biggest is the December quarter Australian inflation with implications for Reserve Bank of Australia rates, the currency and equity markets. Economists expect the core measure to climb 0.5% for the quarter and 1.4% for the year. Elsewhere, Japan releases balance of trade data and South Korea reports GDP growth rate. The US has existing home sales and flash manufacturing PMI.
2. Company news: BHP Billiton reports its operational Review for the half year ended December 31.
3. Market optimism: US stocks had the best run in three weeks and Treasuries tumbled as investors resumed bets that growth in the world’s largest economy will to accelerate. Commodities rallied and the US dollar nudged up after a four-week losing streak. Australian shares are poised to open higher.
4. Iron ore surges: Iron ore spot markets rose strongly on Tuesday, dragged higher by yet another surge in Chinese commodity futures following several days of losses. The spot price for benchmark 62% fines rose by 1.92% to $US82.69 a tonne, according to Metal Bulletin, leaving it just shy of the multi-year peak of $US83.65 a tonne struck on January 16.
5. Australian dollar: The Australian dollar tread water overnight with higher commodity prices offset by a renewed bout of US dollar strength following a lift in US bond yields.
6. US needs free trade: Fred Smith, CEO of FedEx, is pushing back against the new administration’s stance on trade. In an interview with Fox Business Network Smith criticised President Donald Trump’s decision to sign an executive order on Monday that states his intent to pull the US out of the Trans-Pacific Partnership trade pact and displays his more protectionist stances. He said that trade has played a key part in growing the US economy for centuries and can continue to contribute to the growth.
7. Bringing the corporate stash back to the US: Terrence Duffy, the CEO of the CME Group, the world’s largest exchange, said the US companies could easily bring some of the US$2.5 trillion cashed abroad back to the states. But that’s only if Congress can “get off their high horse” and pass a repatriation bill, which would allow US companies with money overseas to bring it back at a lower rate.
8. Companies like the Trump tax plan: Trump has proposed lowering the statutory tax rate on US corporations to 15% from the current 39%. While few companies actually pay the full 39% the possibility that the rate could drop even further has executives pretty jazzed up. According to FactSet’s John Butters, of the 42 S&P 500 companies that reported earnings through January 18, 11 of them have brought up Trump’s tax proposal. It is also the most cited policy of Trump’s by these firms.
9. Air Asia heads to the States: The Malaysian low-cost carrier announced that it has been granted certification from the Federal Aviation Administration to fly into the US. According to the airline, AirAsia X is the first Asian low-cost carrier to secure authorisation to operate scheduled service into the US.
10. China conundrum: China has just been presented with a harrowing choice for its economy, by Henry Fernandez, the Chairman and CEO of MSCI. The choice is both complex and simple: Either keep money from flowing out of the country, or join the ranks of the world’s modern, transparent economies. Choosing the former would be an act of desperation. Choosing the latter, at least in the short term, could unleash untold amounts of pain on the country.
Here’s an Australia Day eve bonus: Dinner by Heston Blumenthal at Crown Towers will feature Vegemite ice cream on the menu this Thursday to mark Australia Day.