To the scoreboard:
Dow: 21,637.74 +84.65 (+0.39%)
S&P 500: 2,459.27 +11.44 (+0.27%)
AUD/USD: 0.7824 -0.0006 (-0.03%)
ASX200 SPI futures (Sept contracts): 5,704 (+14)
Iron ore benchmark 62% fines: $US65.74 (-0.26%)
1. US data misses the mark (again): The US dollar index fell to a 10-month low and bonds rallied on Friday night, following another round of poor data in the US. Annual inflation for June was 1.6% — the smallest increase since October 2016 — while retail sales fell 0.2% against a forecast rise of 0.1%. Along with falling consumer confidence and US Federal Reserve Chair Janet Yellen’s cautious stance mid-week, and adds to doubts about the current rate of growth in the US economy.
2. But meanwhile…: The Aussie dollar is charging. As David Scutt noted on the weekend, the AUD broke through its recent resistance level of US77.4 cents earlier on Friday. With the US dollar weaker across the board following another poor round of data, that gave the Aussie added momentum to push above US78 cents. The Euro is at a multi-year high of $US1.1469, and pound rose more than 1% to $US1.31 – its highest level since September 2016.
3. Bonds rally: Yields on US and Australian bonds fell, with the yield on shorter-term 2-year debt initially dipping to a 1-month low following Friday’s data release. US 10-year notes dipped 3 basis points to 2.32%, while Aussie 10-years are down around 10 basis points from recent highs.
4. Stock market continues its record run: US stocks benefited from falling bond yields on Friday, and the ASX200 is pointing to a higher open after the S&P500 closed at a new record high. Nine out of the 11 major US stock indexes rose, led by gains in utilities which provide stable income streams and typically benefit from a fall in bond yields. Despite record profits from JP Morgan, the financials index fell by 0.5% as US earnings season got underway.
5. Oil shows resilience: Benchmark crude oil closed at $US48.91 on Friday, capping a weekly a gain of 4.5%. Stronger demand, combined with OPEC’s supply cut extension, is raising hopes that the global oil supply glut will fall in the second half of this year. Iron ore spot prices were flat on Friday, although futures are pointing higher ahead of this morning’s China GDP figures. Gold got a boost from lower bond yields and a weaker US dollar, climbing by 0.6% to $US1,229 an ounce.
6. Cryptos get smashed: It was a rough weekend on the cryptocurrency roller coaster. Bitcoin is back below $US2,000 for the first time since May 17, as the ongoing debate about how best to use the Bitcoin platform adds to uncertainty. Bitcoin is now almost 40% lower from its all-time high in early June. Meanwhile, Ethereum lost around 25% in value just over the weekend. The price of an Ether token dipped below $US140 overnight before a small rally.