Good morning, here’s what you need to know to start the day.
First, the scoreboard:
Dow: 21,006 -3 (+0.01%)
S&P 500: 2,383 +1 (+0.05%)
SPI 200 Futures (March): 5,728 +21 (+0.37%)
AUDUSD: 0.7587 -0.0007 (-0.09%)
1. Yellen on board with rate increase: In a speech on Friday, Federal Reserve chair Janet Yellen confirmed that the Fed is likely to raise its benchmark interest rate on March 15, as long as data on employment and inflation remains positive. The next monthly jobs report is scheduled for March 10 and the Fed will get a Consumer Price Index report on the day of the decision. Markets now predict the chances of a rate increase in March at higher than 90%.
2. Friday trading in global markets: Aussie futures point to a slightly lower open today as US stocks clawed back early losses on Friday to finish fractionally up at the close of trade. Treasuries had their fifth straight day of losses as the yield on US 10-year notes rose one basis point to 2.48%. The US dollar fell 0.8% against a basket of six major currencies but the US dollar index (DXY) was still on track for its fourth straight weekly gain. The pan-European STOXX 600 finished 0.1% lower on Friday but was up 1.4% for the week, while the MSCI global stock index lost 0.5% to end with a weekly gain of 0.25%.
3. Data today: Australia has retail sales figures and the Melbourne Institute inflation gauge. ANZ also releases its February job ads report. The US has monthly data for factory orders and revised durable goods orders.
4. China cuts growth target: At the opening of the annual meeting in parliament on Sunday, premier Li Keqiang stated that China aims to grow its economy by 6.5%. According to Reuters, the growth figure is down slightly from last year’s forecast of between 6.5% and 7%. China achieved 6.7% growth last year. The slightly reduced growth target comes as Beijing signals a shift towards a more stringent monetary policy to reduce speculative investments. The 2017 target for broad money supply growth was cut slightly to around 12% from about 13% for 2016. The government’s budget deficit target was kept unchanged at 3% of GDP.
5. China cuts back on coal, steel: In other comments at the opening of parliament, premier Li stated that China will cut coal production by 150 million tonnes and reduce steel capacity by 50 million tonnes this year. Iron ore benchmark 62% fines fell on Friday for the third time in four sessions, but are expected to open sharply higher today.
6. Low cost to hedge against market correction: With market volatility at historic lows and the Dow at an all-time high, the price of hedge trades, which would profit from a market correction, look decidedly cheap, according to Goldman Sachs. In a warning that the recent low volatility may be causing some investor complacency, the bank’s derivative strategists note that the last time costs for protecting against downside risk were this low was in July 2015, just prior to a market sell-off the following month.