Good morning and happy Friday.
To the scoreboard:
Dow: 20,919 -24 (-0.11%)
S&P 500: 2,394 -5 (-0.22%)
AUD/USD: 0.7376 -0.0002 (-0.03%)
ASX200 SPI futures (June contracts – 20 minute delay): 5,856 -9
Iron ore benchmark 62% fines: $US60.38 -$US0.37 (-0.6%)
1. US markets exercise caution: The S&P500 eased back after its attempt at breaking 2,400, while US 10-year treasuries fell back below 2.4% and gold moved off its recent lows. While the retail sector continues to drag on US stocks after a weak earnings season, there was more good economic data as producer price inflation (PPI) rose 2.5% — the highest level since February 2012 — and jobless claims came in at an almost 30-year low. This chart from Greg McKenna at AxiTrader shows the steady fall in jobless claims since the global financial crisis:
2. Bank of England holds: The Bank of England held rates as expected, and the pound fell back below $US1.29 as the accompanying statement was not deemed particularly hawkish. In other G10 currencies, the US dollar took a breather after posting strong gains this week, falling below 114 Japanese yen. The Euro is holding above $US1.08. The Aussie dollar was up and about, climbing back towards US74 cents. It’s unlikely to break far in either direction today pending US inflation figures tonight.
3. Iron ore holds on: After futures markets suggested another ugly fall for iron ore yesterday, there was a small comeback late in the session and spot prices managed to hold above $US60 per tonne. That may ease pressure on the miners today, but SPI futures traders have still marked the local index down by 9 points as the fallout from the governments levy on the big banks (which make up 25% of the ASX market cap) continues. Here’s the six-month chart for iron ore, with a break below $60 looking increasingly likely:
4. Data today: The only data in Australia today is credit card purchases. Overnight, the Eurozone has industrial production data, while the US has a key data points for both hard data (annual inflation excluding food & energy at 10:30pm AEST) and soft data (the University of Michigan Sentiment Index).
5. Snap still has support from its banks: Snap Inc. felt the wrath of the market yesterday after a poor earnings report. Probably not surprisingly, the two lead banks on its initial public offering (IPO) — Morgan Stanley and Goldman Sachs — are still supporting the stock. Morgan Stanley highlighted user engagement as a key strength, with average user time of more than half an hour per day. Goldmans stuck to its forecast of strong sales growth over the next five years.
6. There’s a hidden gem on global stock markets: Given the global rally in stocks since Donald Trump’s election, concern has grown in some corners about whether developed markets are over-valued. It might be worth keeping an eye on India — a huge developing economy with a share market that’s grown 17.5% since November. It’s got notable investors including Warren Buffett watching out for potential opportunities. This chart from investing.com shows the growth in India’s Nifty 50 stock index: