To the scoreboard:
Dow: 20,607 -373 (-1.78%)
S&P 500: 2,357 -44 (-1.82%)
AUD/USD: 0.7434 +0.0004 (+0.05%)
ASX200 SPI futures (June contracts – 20 minute delay): 5,720 -62
Iron ore benchmark 62% fines: $US62.20 +$US1.03 (+1.68%)
1. Comey memo riles markets: Global markets went into full risk-off mode overnight as the fallout continues from fired FBI director James Comey’s memos. All the primary safe haven trades saw heavy inflows. The Japanese yen rose strongly against the dollar, with USD/JPY falling 2% to 110. Gold rose another 2% to more than $US1,260 an ounce, and US 10-year treasuries fell 8 basis points to 2.22%. CME’s Fedwatch has now dropped the probability of a June rate hike by the Federal Reserve to 64.6%.
2. Stocks crash: US stocks had their worst day in eight months, losing almost 2% while the tech-focused NASDAQ index plunged by 2.6%. European stocks were also sold heavily. The market finally reacted to concerns about president Trump’s involvement in an FBI investigation, which raises questions about government stability and whether Trump will be able to push through his pro-growth agenda.
The CBOE volatility index — in the news lately for trading at record lows — reacted to the market jitters overnight, rocketing up by 46% amid the global sell-off:
3. US dollar backtracks: In addition to safe haven currencies, the Euro continued its recent strength against the US dollar rising above $US1.11. As a riskier, commodity-linked currency the AUD only treaded water against the greenback, and it fell heavily against the Euro and Japanese yen.
Currency traders were a step ahead of the share market this week. While the S&P500 was at record highs, capital started to move out of US assets, particularly the US dollar. The USD index is now at 97.42, which is around the level it was just prior to Donald Trump’s election victory:
4. Data today: The ABS releases April employment data today and Business Insider will have full coverage — here’s your quick guide. It’s quite the day for a key data release, given that the recent weakness in Aussie stocks is likely to exacerbate what will be a rough session on local markets. Japanese GDP also comes out this morning.
5. Commodities wrap: Iron ore maintained its recent stability and caught another bid overnight. Credit Suisse analysts think it could make a run back to $US70 a tonne. Oil rose to a two-week high despite a smaller than expected US inventory draw-down, as a decrease in refined gasoline gave oil bulls some hope that prices can be supported from the demand side.
6. New asset class rises from retail’s fall: The shift underway in retail has been well-documented, with the share prices of both US and Australian retailers falling heavily as new players shake up the industry. This post shows that amid traditional retail’s demise, industrial real-estate has emerged as a winner. The popularity of online purchases with same-day delivery means that the demand is rising for industrial property with warehouses in good locations.