Good morning. Welcome back from the Australia Day weekend. Here’s what’s happening as Monday begins.
First, the scoreboard: (7:50am AEDT)
• Dow: 20,093 -7 (-0.04%)
• S&P 500: 2295 -2 (-0.1%)
• SPI 200 Futures (March): 5,649 +0.5 (+0.01%)
• AUD/USD: 0.7547 +0.00011 (+0.2%)
1. US dollar drops, stocks stay near record high: The greenback weakened, and Treasuries climbed after data showed US economic growth cooled last quarter. American equities were little changed near all-time highs amid earnings. The pound pared its weekly gains and Mexican peso climbed after President Donald Trump and Mexican President Enrique Peña Nieto had an hour-long phone conversation. Australian stocks are set to open tkk
2. Data today: Japan releases retail sales numbers, China has consumer sentiment data and Spain releases Q4 GDP. US reports Dallas Fed manufacturing data and pending home sales.
3. Apple earnings: Apple has faced three consecutive quarters of overall year-on-year declines in revenue, which is expected to rebound this quarter if the iPhone — which accounts for two-thirds of Apple’s revenue — and other Apple products had a big holiday season. The holiday quarter is Apple’s biggest quarter. But besides the numbers, there’s one big thing that investors will be looking at from Apple’s earnings: whether its services business, which includes the App Store, Apple Music, and Applecare warranties, is becoming Apple’s second firehose of profit after hardware sales.
4. US GDP whiffed: The first estimate for fourth-quarter GDP showed the US economy grew at an annual rate of 1.9%, according to data released by the Bureau of Economic Analysis. Wall Street had expected growth of 2.2%.
5. Australian dollar: The Australian dollar has opened the new trading week modestly higher, maintaining the gains achieved last Friday following the release of the advanced US Q4 GDP report which underwhelmed market expectations.
6. Buoyant iron ore: Iron ore spot markets ended last week largely unchanged as Chinese New Year Celebrations got underway. The spot price for benchmark 62% fines held steady at $US83.34 a tonne, according to Metal Bulletin, leaving it within touching distance of the multi-year peak of $US83.65 a tonne level struck earlier in the month.
7. Another hard bailout for Greece?: An independent Greek parliamentary report has warned that Greece faces an increased risk of a fourth bailout — or even a default — if delays in negotiations with bailout lenders are not overcome in the next few weeks.
8. Bitcoin “could be the new gold”: Gold has traditionally been seen as a “safe haven” asset by investors — when uncertainty and risk is high, gold seems like a safe bet. Bitcoin, likewise, has attracted investor attention when uncertainty and risk is high. The currency spiked on Donald Trump’s shock victory in the US election and bitcoin wallet provider Blockchain had a record month as a result.
9. Major changes to financial markets: Elliott Management, the US$31.6 billion New York hedge fund run by Paul Singer, sees a major change coming to the financial markets as a result of President Trump’s election.
It’s just too soon to know exactly what will follow. “Much of the contemplated agenda is supportive of growth (e.g., reforming the tax code, streamlining regulation and expanding natural resources production),” the fund wrote in an unsigned fourth-quarter letter to investors. “Other proposals could be harmful to growth depending on how they are implemented (e.g., more restrictive trade policies and tariffs).”
10. The irrelevant pound: The pound’s role in the IMF’s currency composition of official foreign exchange reserves index (more often known as COFER) has likely fallen significantly in recent months, although it is yet to show up in official data, according to Deutsche Bank. The sterling’s role as an international reserve currency is going to be permanently diminished as a result of the UK’s vote to leave the European Union, it said.
Monday bonus: Morgan Stanley lead auto analysts and a big Tesla bull on Wall Street doesn’t think Elon Musk’s about turn – from criticising Trump during the elections to joining the President’s business advisory council – will have much impact on Tesla as an investment. In a research note published Friday, Morgan Stanley wrote: “Elon Musk’s advisory relationship with President Trump may involve opportunities to work with 3 key departments of the US government: Transportation, Energy and Defence. While the extent of such potential work is as yet unknown, it is likely not part of the Tesla investment case.”