Bonjour! Happy Bastille Day.
1. The Australian dollar has been on a storming rally this week and is back well above 77 US cents. It’s now at its highest level since March 21, leaving it perilously close to a region of selling resistance that it has struggled to overcome in the past. We’ll see what happens in the Asian trading session. Here’s the hourly chart:
2. Central banking is great again, so here’s a podcast all about it. On this week’s episode of our markets and economics podcast, Devils and Details, we’re joined by CBA senior currency strategist Elias Haddad. As a Canadian he’s well-placed to talk about the decision this week to lift rates from the BoC, which has joined the growing group of central banks that are signalling both a brighter outlook ahead and a tightening in interest rates. You can find the show on iTunes, or listen in right here:
3. All that central bank activity has the potential to wake markets from their recent slumber, and someone has placed a $10 million bet that volatility is about to come back to the bond market.
4. But markets remain quiet for now, with the Dow nudging up 21 points or 0.10% overnight. Iron ore’s rally kicked back into gear, though.
5. The head of a $15 billion hedge fund helps explain why. Dmitry Balyasny of Balyasny Asset Management notes that a third of the US market is now held by passive investors through ETFs and says:
“Day to day action is very ETF-driven. While this action won’t change the ultimate valuation of individual companies, it will increase short-term correlations. Portfolio construction needs to be tight and tilts need to be very well managed to navigate these powerful flows. This makes catalysts, earnings, and other events extremely important to play — and play correctly — because that is when dispersion is most likely to occur.”
So, keep an eye on the news. More here.
6. Get ready for the biggest share market float in history. Britain’s financial regulator is paving the way for the IPO of Saudi Aramco, the gulf kingdom’s oil company. Aramco plans to list 5% of the company publicly in an IPO worth between $US50 billion and $US100 billion — making it the world’s biggest by market capitalisation.
7. Speaking of IPOs, they’ve been doing pretty well in recent months on the ASX. Look:
The average gain in share price IPOs in the second quarter of 2017 was 11.4%, according to the OnMarket IPO Report. Over the same three months the ASX200 fell 2.4%.
8. Encrypted messages will no longer be protected under new laws being proposed by the Turnbull government which would force tech companies, including Facebook and Google, to share the contents of communications with authorities where there is suspicion of terrorist activity or planning.
9. Donald Trump is in Paris meeting Emmanuel Macron, and they will attend a Bastille Day military parade later today. The US President was captured telling the French first lady, Brigitte Macron, that she was in “such good shape” in footage posted on Facebook — by the French government.
10. Artificial intelligence is expected to be a $60 billion sector within three years. Here’s a primer on what it is, and how it works.
BONUS ITEM: Remember the underwear rules.
Enjoy the weekend. You can find me on Twitter and get this column delivered to your inbox every morning by punching in your details in the form below. Marchons.