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

Image: Bureau of Meterology.

Good morning. Here’s what’s happening as Friday begins and a “horrifying” three-day heatwave hits Australia’s east coast.

First, the scoreboard (8:00am AEDT):
• Dow: 20172 +118 (+0.6%)
• S&P 500: 2307 +13 (+0.5%)
• SPI 200 Futures (March): 5,635 +36 (+0.6%)
• AUD/USD: 0.7630 -0.0015 (-0.20%)

And the news.

1. US stocks hit record high: President Donald Trump’s promise of a “phenomenal” tax reform was all it took to bring back the reflation trade. The S&P 500 index scampered away to hit a record high, the dollar jumped, Treasuries and gold fell after Trump said that administration will announce “something phenomenal in terms of tax” over “the next two or three weeks.” Australian shares are poised to open higher.

2. Lowe on the Aussie: Reserve Bank of Australia governor Philip Lowe, during a speech delivered to A50 Australian Economic Forum Dinner in Sydney, remarked that it was “hard to say if Australian dollar is too high given the reasonable growth outlook”. He also said some strengthening in employment growth might coming and the RBA continues to pay close attention to the housing market and household balance sheets.

3. Blankfein says all will be OK: Goldman Sachs CEO Lloyd Blankfein has heard so may people talk about uncertainty in the markets lately that, he says, it’s starting to sound “trite”. So in a recent video posted on Goldman Sachs’ website, Blankfein delved into the causes of that uncertainty and why, in his view, everything is going to be OK. Under Trump, we can expect to see less regulation, rather than more; lower taxes, rather than higher; and a bigger commitment to infrastructure spending, Blankfein said. That has boosted GDP expectations and optimism.

4. Data today: All eyes on the Reserve Bank of Australia’s quarterly Statement on Monetary Policy where updated economic growth and inflation forecast will be revealed. Attention will be on the central bank’s underlying inflation forecast for 2019. China reports balance of trade and Japan releases PPI. US has consumer sentiment and import and export prices data.

5. Company news: REA Group posts earnings while News holds its investor call after earnings.

6. Iron ore just rallies: Iron ore continued to rally on Thursday, hitting the highest level since October 2014 in the process. The spot price for benchmark 62% fines rose by 0.37% to $83.84 a tonne, according to Metal Bulletin, the third straight gain in a row. It’s now put on the 119% from the record low of $38.30 a tonne stuck in mid-December, leaving it at highs not seen since October 13, 2014.


7. Aussie dollar: The Australian dollar endured a volatile session overnight but in the end went nowhere, initially rising on optimistic remarks from RBA governor Philip Lowe before giving back all those gains after Trump’s tax talk put a rocket under the US dollar.

8. Next phase of currency cold war: Cold wars are not fought in open battle but with covert actions and words, money manager PIMCO says. Joachim Fels explained how the European Central Bank (ECB), the Bank of Japan (BOJ) and the People’s Bank of China (PBOC) opened the cold currency war through guarded actions that contributed to the depreciation of their currencies against the dollar during the second half of 2016. Yet he also said the US’s “benign neglect seems unlikely to survive Trump’s first 100 days in office”.

9. Apple takes on Aussie lenders: The global head of Apple Pay has put three of Australia’s big banks on notice that the technology giant’s global payments system will steal their customers and they risk being left behind in the development of digital wallets, the Australian Financial Review reports. Only ANZ Bank out of the big four Australian lenders uses Apple Pay now. Jennifer Bailey said that Apple is so confident of the supremacy of its payments system that “customers will say they are happy to switch banks to use it”. Separately, Australian fintech startups Tyro and Afterpay have paired up in blockbuster deal.

10. Something desperate is going on in China’s economy: Things are looking a bit desperate in China. The country has been suffering from money outflows for months — something that troubles Beijing because it pulls down the value of the Chinese yuan and makes the economy harder to manage. Analysts are wondering how long the country can hold on without devaluing the currency, or taking control of it all together and undoing years of reforms to liberalise its markets.

And here’s the Friday bonus – Trump’s plan to make Wall Street unregulated again won’t go unchallenged.