To the scoreboard:
Dow: 21,858.32 +14.31 (+0.07%)
S&P 500: 2,441.32 +3.11 (+0.13%)
AUD/USD: 0.7896 +0.0001 (+0.01%)
ASX200 SPI futures (Sept contracts): 5,638 (-3)
Iron ore benchmark 62% fines $US75.19/t (-1.94%)
1. US inflation data misses (again): At annual growth of 1.7%, July’s inflation data just missed forecasts and remains below the US Fed’s target rate. That was the main driver of markets on Friday night as tension lingered from the increasing animosity between the US and North Korea.
2. US dollar mixed: But overall the USD index finished Friday’s session lower, in response to the subdued US inflation outlook and demand for safe-haven currencies amid the geo-political tensions. Japan’s yen found more buyers, and earlier this morning USD/YEN was close to falling below 109 for the first time since April. The Aussie dollar is trading just below US79 cents this morning, after RBA governor Philip Lowe told parliament on Friday that the bank was not currently planning to use monetary policy to reign in the AUD’s recent strength.
3. While US stocks held their ground: The prospect of a deferred rate hike by the Fed helped provided a floor for stocks as the S&P500 held its ground on Friday. Despite that, after months of low volatility, the S&P500 closed the week down 1.4% — its worst weekly performance since March. UK and European stocks both fell by 1%, as the pound and yen climbed (stocks in both markets benefit from weaker currencies) and the US/North Korea crisis weighed on sentiment.
4. And there was another bond rally: Subdued US inflation also helped to drive further demand for bonds, with the yield (which moves inversely to prices) on benchmark US 10-year treasuries falling below 2.2% for the first time since June. According to the CME Group’s Fedwatch tool, the probability that the US Federal Reserve will hike rates again by the end of this year has now dipped to 36.8%.
5. The day ahead: This morning in Australia there’s the weekly CoreLogic house price index, and a speech by the RBA’s Chris Kent at the Moody’s analytics conference. China has retail sales and industrial production, and there’s the Q2 GDP print for Japan with annual growth forecast at 2.5%. Here’s the calendar for what will be a big week of data for Australian markets.
6. How many Bitcoin have you got?: Hopefully at least a few — the world’s biggest cryptocurrency roared above $US4,000 for the first time over the weekend on increased demand from Japan. Here’s an eye-watering stat: $US1,000 invested in Bitcoin on July 22, 2010 would now be worth around $US70 million – not a bad return. Bitcoin’s alternative Bitcoin Cash and the world’s second biggest cryptocurrency, Ethereum, were little-changed and are both trading around $US300 this morning.
Bonus item: Good read by Business Insider’s Joe Ciolli with experts weighing in on how the US/North Korea crisis will have an impact on markets.
Enjoy your week, I’m on Twitter @Mr_SamJacobs.