To the scoreboard:
Dow: 22,871.72 +30.71 (+0.13%)
S&P 500: 2,553.17 +2.24 (+0.09%)
AUD/USD: 0.78951 +0.0067 (+0.86%)
ASX200 SPI futures (December contracts): 5,766 (-2)
1. US inflation remains subdued: CPI data on Friday night showed that core inflation remains below the US Fed’s 2-3% target, with a monthly rise in September of 0.1% (forecast 0.2%) leaving annual underlying inflation at 1.7%. The yield curve flattened on the news, as benchmark 10-year US treasury yield fell by five basis points to 2.27%. The CME Group’s Fedwatch tool currently has the probability of a December rate increase at 81.7%.
2. Strong session for the Aussie: The US dollar index traded flat in the wake of the inflation data as the greenback held its ground against the euro. But that didn’t stop demand for the AUD, which performed strongly against all major currencies and closed at just under US79 cents:
3. US stocks keep climbing: The S&P500 edged higher again to end the week at another record high, as inflation remains low but the US economy looks steady — September retail sales were solid and the Atlanta Fed has updated its Q3 GDP growth forecast to 2.7%. Meanwhile, the ASX200 broke through 5,800 for the first time since June and futures traders are confident of another rise this morning.
4. Data this week: The main focus domestically will be on Thursday’s employment report, where the economy will be looking to add jobs for the 12th straight month. Internationally, it’s a big week in China starting with September inflation data today. New Zealand, the UK and Canada also have inflation prints while it’ll be a quieter week in the US. The full calendar is here.
5. Iron ore rebounds: Benchmark 62% fines posted their best gain in four months on Friday, and futures price action suggests more gains may be in store today. In base metals, copper remains elevated at multi-year highs and gold got a boost from lower bond yields, climbing back above $US1,300 an ounce. Oil closed up around 3% for the week with benchmark crude oil settling at $US57.13 a barrel.
6. A flaw in Buffett’s argument: The S&P500 is trading at record highs and according to Warren Buffett, “valuations make sense with interest rates where they are“. But economics professor John Hussman argues that statement only tells half the story. He thinks stocks look wildly overvalued compared to economic growth, and is predicting negative returns over the next 10-12 years.
Enjoy your day, I’m on Twitter @Mr_SamJacobs.