To the scoreboard:
Dow: 21,574.73 -54.99 (-0.25%)
S&P 500: 2,460.61 +1.47 (+0.06%)
AUD/USD: 0.7917 +0.0116 (+1.44%)
ASX200 SPI futures (Sept contracts): 5,693 (-4)
Iron ore benchmark 62% fines: $US68.84 (3.04%)
1. Aussie consolidates: The AUD continued its strong performance against the major currencies overnight, as global markets assessed yesterday’s RBA minutes as indicative of a shift in the bank’s interest rate policy. A rate increase in Australia is now priced in for the middle of next year. It follows the failure to pass Trump’s replacement US healthcare bill, which drove the US dollar lower across the board, with the euro holding above $US1.15 — its highest level since May 2016.
2. Stronger euro weighs on stocks: US stocks were indifferent to the USD sell-off as earnings season continues. Fiscal gridlock in the US in addition to a soft run recent data points is weighing on the US inflation outlook, with yields on 10-year bonds falling 5 basis points to 2.26%. A stronger euro helped drive the EURO STOXX600 index down 1.1%, led by a 1.3% fall in Germany’s export-intensive market. It points to a soft open for the ASX200, with Westpac’s leading index at 10:30am AEST the main data point in Australia today.
3. Weaker USD providing a good backdrop for emerging markets: The MSCI EM Index trading at its highest level since April 2015. For emerging markets in Asia, China’s Shanghai Composite index steadied yesterday after Monday’s 1.4% fall sparked by a sell off in smaller tech companies. The tech-focused ChiNext index of small-cap stocks rose by 0.67%. India’s Nifty 50 index fell by 0.9% after hitting a new record high to start the week.
4. Greece rejoins the bond market: Greece is expected to issue government bonds for the first time since 2014, according to the Financial Times. The bonds will have a 5-year term with a yield of around 4.5%. It follows the latest debt relief payment by the Eurozone after Greece completed a review of its finances. The new bond issue is reflective of generally stable condition in global credit markets, with strong demand to an issue of 100-year bonds by Argentina last month at a yield of 8%.
5. Crypto currencies charging: Bitcoin is back above $US2,300, after starting the week below $US2,000. Gains have been driven by reports that the Bitcoin community is close to an agreement on increasing blockchain transaction speeds, with a virtual split or “fork” of the currency now unlikely. Ethereum hasn’t been left out, rocketing up by around 45% over the past two days although one Ethereum’s co-founders says it’s a “ticking time bomb“.
6. Iron ore booming: Strong operating margins at Chinese steel mills continues to provide the impetus for the iron ore rally. Spot prices for benchmark 62% fines are now at their highest level since April, surging by 29% over the last month. Gold has also got a boost from the combination of US dollar weakness and lower bond yields, posting its third straight day of gains back above $US1,240 an ounce. Benchmark crude oil closed steady at $US48.84 a barrel.
Find me on Twitter @Mr_SamJacobs.