To the scoreboard:
Dow: 21,528.99 +144.71 (+0.68%)
S&P 500: 2,453.46 +20.31 (+0.83%)
AUD/USD: 0.7599 -0.0020 (-0.26%)
ASX200 SPI futures (Sept contracts): 5,751 (+8)
Iron ore benchmark 62% fines: $US56.30/t (+1%)
1. Dudley moves the markets: The US dollar caught a bid overnight, performing strongly across the board against other G10 currencies and finishing up 0.4%. US markets were buoyed by comments from New York Federal Reserve president Bill Dudley, who said the US economic expansion still had a long way to go. The S&P500 and NASDAQ closed at new record highs, and stocks in the UK and Europe also gained in a strong session for global markets.
2. A bullish Monday: With no major data releases on Monday, US markets got back on track with a more bullish tone. In addition to stocks and the US dollar, US treasury yields rose and the yield curve steepened as Dudley’s comments reinforced the Fed’s view of the economy despite a poor run of recent data. US 10-years climbed 3 basis points to 2.19% as part of a mild global bond sell-off, while the US dollar performed strongest against the yen and gold fell below $US1,250 an ounce.
3. Australia today: ASX futures traders have marked the local index higher, although it will be interesting to note what effect Moody’s ratings downgrade last night has on the major banks. The Australian Financial Review reported that Deutsche analysts don’t expect a change to the banks’ funding costs as a result of the downgrade. The Aussie dollar gave up some ground overnight on US dollar strength and the ratings downgrade, but fought back to around US76 cents as commodity prices again performed strongly.
4. Key data: Today’s release of the RBA’s minutes from its June meeting (11:30am AEST) is the main data point in a quiet week of local data. The ABS has house price data for Q1 2017, which provides a snapshot of the total value of housing stock in Australia. Regionally, the MSCI is scheduled to decide today on whether to include shares from the Chinese mainland in its global stock index, which would have the effect of opening up global capital flows to Chinese markets.
5. Staying “Sharpe”: It’s been an 8-year bull run for global stocks in an era of low volatility aided by central bank stimulus. That’s good for investors, but low volatility also makes it hard to beat the market. This post examines the Sharpe Ratio, which Goldman Sachs uses to construct a basket of 50 stocks identified as having risk adjusted returns. According to Goldman, fund managers should look to maximise risk adjusted returns rather than just minimise volatility. And it’s worked:
6. Snap does a deal: Snap Inc (the parent of Snapchat) got some good news overnight, stitching up a $US100 million deal with media giant Time Warner to broadcast shows and show advertisements in the app over the next two years. The deal builds on agreements with other networks to play 5-10 minute videos through Snapchat. It’s welcome news for Snap, which has consistently been the target of short-sellers since its listing in March. It’s share price closed the day up 1.92% at $US17.88.
You can find me on Twitter @Mr_SamJacobs.