To the scoreboard:
Dow: 21,629.72 -8.02 (-0.04%)
S&P 500: 2,459.14 -0.13 (-0.01%)
AUD/USD: 0.7800 -0.0002 (-0.03%)
ASX200 SPI futures (Sept contracts): 5,693 (-4)
Iron ore benchmark 62% fines: $US66.81 (1.63%)
1. China gets the wobbles: After months of calm, there were significant moves in Chinese stocks yesterday with the Shanghai Composite Index falling 1.2%. Yesterday’s China GDP report came in at 6.9% as expected. While the GDP figures typically have a minimal effect on markets, Monday trade followed a weekend conference in which President Xi Jinping oversaw the setup of a new regulatory body to monitor financial risk. Details here. That put small-cap stocks in the firing line, with the Chinext small-cap index crashing by 5.1% and almost 500 stocks hitting their daily limit-down of 10% falls.
2. Greenback still subdued: Major currencies were little changed to start the week, with US dollar still under pressure following last week’s dual-negative effects of a more cautious US Federal Reserve and underwhelming inflation data. That comes as Blackrock CEO Larry Fink said it will be hard for the US to meet President Trump’s stated growth target of 3% this year and the bond market seems to agree — US 10-year bonds have fallen back to just above 2.3% this morning.
3. India hits a new record: A weaker US dollar helped boost the continued flows of capital into emerging markets. Outside of China, stocks in the bigger Asian market all rose yesterday with Hong Kong’s Hang Seng and the South Koren KOSPI index both higher, while India’s Nifty 50 hit a new record. Stocks in developed markets traded flat after a quiet session in Australia to start the week.
4. Iron ore is on the charge: Commodities markets shrugged off the credit concerns in China and instead focused on the solid GDP report. Benchmark iron ore rose last night to its highest level since the start of May and base metals were higher across the board, with futures also surging ahead of today’s session. Stronger commodities failed to provide support for the Aussie dollar, which failed to push higher as traders booked in profits following strong gains last week.
5. Stocks look pricey but don’t panic: US stocks are at record highs, and it has market analysts questioning whether current market values are justified. Goldman Sachs says don’t worry. Goldman’s analysts cast doubt on a recent measure which shows that corporate profit margins have been tightening. Instead, the focused on the current return on equity (ROE) from US stocks and also looked at the current rate of annual earnings growth – both of which suggest listed companies in the US are in good shape.
6. Cryptos find a floor: Bitcoin rose by 15% and is back above $US2,000 this morning. Ethereum also bounced off the canvas, climbing by more than 20% from below $US150 to around $US180 a short time ago this morning. Daily moves of 15-20% have been common lately, and the volatility may continue this week ahead of July 21 when the Bitcoin network will implement a test-run of its new platform with higher transaction speeds.