Good morning. Here’s what’s happening as Monday begins.
First, the scoreboard (8:00am AEDT):
• Dow: 20269 +97 (+0.4%)
• S&P 500: 2316 +8 (+0.5%)
• SPI 200 Futures (March): 5,682 +47 (+0.8%)
• AUD/USD: 0.7666 +0.0042 (+0.55%)
And the news.
1. Australia, Asia open: Australian shares are set to open higher on stronger commodity prices with Asia poised for a similar open after US stocks jumped to another record. Oil also rallied as investors reignited reflation trades while awaiting details of the Trump administration’s plan to cut taxes. The greenback wiped out all its losses as the president vowed the currencies of the US, China and Japan would soon be on a level playing field.
2. Markets nervous about Trump: Three weeks into the Trump presidency the trade is starting to wear off. The enthusiasm in markets following the election of Trump (which it should be noted was the opposite reaction of consensus) has seemed to wane since the inauguration as investors digest the president’s policies. Stocks have cooled off on a relative basis in recent days. From the election on November 8 to Inauguration Day the S&P 500 and Dow Jones Industrial average jumped by 6.2% and 8.2% respectively. Since the inauguration, the indexes have moved up just 2.0% for the S&P and 2.3% for the Dow.
3. US consumer confidence dropped for the first time since the election: The University of Michigan’s survey of consumers showed a drop in expectations for economic growth. The preliminary sentiment index for February slipped from a 12-year high in January to 95.7. It had been forecast at 98, down from 98.5, according to Bloomberg.
4. Data today: Australia only has overseas arrival and departure information. China releases data on loan growth and money supply. Japan posts fourth quarter GDP data.
5. Company news: JB Hi-Fi, Aurizon, AMcor, Bendigo & Adelaide Bank, Ansell and Newcrest mining report earnings.
6. Iron ore goes parabolic: Iron ore spot prices continued to rip higher on Friday, rising to fresh multi-year highs following the release of bullish Chinese trade figures for January. And there could be even further substantial gains to come if Chinese iron ore futures are anything to go by. According to Metal Bulletin, the spot price for benchmark 62% fines soared by 3.32% to $86.62 a tonne, the fourth consecutive gain in a row.
7. Aussie dollar: The Australian dollar has opened the new week slightly firmer, consolidating on the solid gains recorded on Friday. After hitting a low of .7613 on Friday, the AUD/USD ripped higher in the second half of the session, powered by a stronger-than-expected Chinese trade report from China for January, strength in commodity prices, an optimistic set of forecasts from the RBA in its latest quarterly statement on monetary policy and further gains in stocks, eventually closing the session at .7669.
8. Macquarie says Aussie banks can slash jobs: Assuming banks revenue grows between 2% to 4%, Macquarie estimates the four-largest banks could each cut costs by as much as $700 million over three years and the savings could increase to $1 billion each if growth slips further. The banks could shed 20,000 jobs to save more than $2 billion if revenue growth disappointed, Macquarie estimates.
9. Some fund managers optimistic on the US president: According to UBS Investor Watch survey of high net worth and ultra-high net worth individuals, their optimism about the US economy has increased dramatically since the presidential election. A majority of these investors are actively looking for opportunities in the market, with 42% looking to add to their equity portfolios.
Dan Loeb’s fund Third Point went big on JPMorgan and Bank of America, and to a lesser extent, Goldman Sachs, investing nearly $1 billion in the banks’ shares during the fourth quarter of 2016.
Binky Chadha, Deutsche Bank’s chief global strategist, says that his year-end target for the benchmark S&P 500 is 2,600. That topped the call for 2,575 made by John Praveen, Prudential’s chief investment strategist, which was the previous high that Business Insider observed. Both strategists believe the market will maintain the momentum it gained after president Donald Trump’s election in November 1.
9. Wall Street’s top regulator is resigning from the Fed: Daniel Tarullo will resign from the Federal Reserve’s Board of Governors on or around April 5, according to a statement on Friday. President Barack Obama appointed Tarullo in 2009 for a term that would have expired at the end of January 2022.
10. Why risky assets: Jim Keenan, who manages over $160 billion in fixed-income assets at Blackrock says a “regime shift” in the economy is encouraging investors to take on more risk. But that’s only likely to become a problem in the next two years or so.
MONDAY BONUS: Doomsday prepper supply companies saw a sales surge after Trump’s election.
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