Good morning. To the scoreboard:
Dow: 20,855 -69 (-0.33%)
S&P 500: 2,363 -5 (-0.22%)
SPI 200 Futures – March (20 minute delay): 5,735 -19 (-0.33%)
AUDUSD: 0.7530 +0.0058 (-0.76%)
1. US to raise rates: Treasuries are tumbling this morning following the release of ADP private payrolls data which smashed analyst expectations. Yields on US 10-year notes are up by almost five basis points to 2.56% and the US dollar index rose by 0.25% as the prospect of a March rate increase has now been priced in with 100% certainty.. The AUD retreated to its lowest level against the greenback since January 30.
2. Key data: Focus will be on the European Central Bank (ECB) as it publishes its economic update on Thursday. The ECB decision will be at 11:45pm AEDT. China has consumer and producer inflation data for February at 12.30pm AEDT. Analysts expect an increase in CPI of 1.7% from the same month last year, with PPI tipped to surge by 7.7% over the same period.
3. ECB meeting: Despite some positive signs, ECB president Mario Draghi isn’t likely to announce any major policy shifts. Interest rates are likely to be kept on hold, and analysts don’t expect any changes to the bank’s bond purchasing program — yet. Although recent data showed headline inflation increased by more than 2% for the first time in four years, the underlying figure (adjusted for rising oil prices) rose by only 0.9%.
4. Oil down 5%: West Texas intermediate crude oil dropped by 5.5% to be trading at $50.24 this morning. Benchmark brent crude was also down more than 4% at $53.25. Prices slumped after the US Energy Information Agency reported that oil stockpiles increased by 8.2 million barrels for the week to March 3. It was the eighth straight week of gains in supply, with US stockpiles now sitting at 528.4 million barrels which is in the upper end of historical ranges. US shares traded flat as energy stocks dragged on the market due to a drop in the oil price.
5. Metals: Iron ore slumped again overnight, as the price for benchmark 62% fines slumped by 2.91% to $87.19 a tonne. The price has dropped by 8.1% since February 10. Gold, zinc and copper all retreated due to a stronger US dollar.
6. Bullish billionaire: Although the Dow just reached a record high and interest rates are about to rise, billionaire US hedge fund manager David Tepper has gone long. In Tepper’s view, the global macro outlook is positive. He’s invested in European stocks and thinks the US economy will continue it’s growth trajectory until inflation starts rising more aggressively.