Good morning! Here’s the scoreboard (8am AEDT):
Dow: 20,955 -51 (-0.24%)
S&P 500: 2,376 -7 (-0.30%)
SPI 200 Futures – March (20 minute delay): 5,724 -4 (-0.07%)
AUDUSD: 0.7583 -0.0010 (-0.13%)
1. Data today: The Reserve Bank of Australia (RBA) will announce its March interest rate decision at 2:30 pm AEDT. All expectations are that the bank will keep the benchmark interest rate on hold at 1.5%, but as usual markets will look carefully at the accompanying statement, particularly for any shift in the bank’s view on the housing market. The US reports its balance of international trade figures for the month of February.
2. On global markets: Wall street dipped overnight as the Dow slipped back below 21,000. Investors are exercising caution as the CBOE Volatility Index (VIX) rose for the first time in four days, amid accusations from Donald Trump that Barack Obama wiretapped his phones. The yield on US 10-year notes was up by 3 basis points and the dollar advanced slightly as the likelihood of a March rate increase is now almost fully priced in. In Europe, the STOXX market index shed 0.5%, with Deutsche Bank down 5.5% as the market reacted negatively to the bank’s proposal for an 8 billion-euro capital raising.
3. Commodities: Iron ore spot markets continued their recent falls, as the the price for 62% fines slid 1.74% to $89.73 a tonne, leaving it at the lowest level since February 10. Copper and aluminium both fell by more than 1%, amid expectations that demand from China will slow in the wake of the Chinese government’s latest growth outlook.
4. Oil: West Texas intermediate crude prices were stable overnight. The International Energy Agency (IEA) said it expects oil companies to increase investment in 2017, following two years of 25% spending cuts driven by low oil prices. Non-OPEC production led by the US and Russia is expected reach 3.3 million barrels a day by 2022, up from a forecast of 2 million barrels a day by 2021 at the same time last year.
5. US growth outlook: A research note from Goldman Sachs suggests that despite the positive market reaction to the Trump administration’s proposals for tax cuts and infrastructure, the actual implementation of those measures is further away than markets expect.
6. Too much information: Analysts from Morgan Stanley think that the excessive forward guidance provided by the US Federal Reserve in the lead up to its interest rate decision is distorting the market’s reaction. The bank says that because the Treasury market doesn’t have to draw it’s own conclusions about economic data independent of the Fed, yields are likely to remain subdued and upward pressure on stock prices will remain through the end of March.