To the scoreboard:
Dow: 21,467.14 -61.85 (-0.29%)
S&P 500: 2,437.03 -16.03 (-0.67%)
AUD/USD: 0.7580 -0.0019 (-0.35%)
ASX200 SPI futures (Sept contracts): 5,667 (-29)
Iron ore benchmark 62% fines: $US56.45/t (+0.27%)
1. Oil hits a bear market: Both benchmark and US crude prices fell by more than 2% overnight. The market remains unconvinced about the effect of OPEC’s latest round of supply cuts, with May figures showing increased production in Libya and Nigeria. US API inventory data showed a reduction of oil stocks that was slightly above forecasts, but oil futures are little changed with prices now 20% lower since January. A bearish note from Bank of America Merrill Lynch suggests that if technical support fails to hold, oil prices could fall back to the $US30 a barrel range.
2. Stocks feel the effect: The fall in oil dragged on US stocks, with the S&P500 having its biggest daily decline in more than a month. Stocks in the UK and Europe also declined, although growth indicators in Germany and France beat expectations as the run of good data from Europe continues. It’s looking like a rough day ahead on the local market with energy stocks likely to feel the brunt of it after bank shares dragged the index lower yesterday following the Moody’s downgrade. Westpac’s index of leading growth indicators will be the only data point domestically.
3. USD stays on the march: With no major data points this week, the US dollar gained more ground against G10 currencies and bond yields rose courtesy of the US Fed, with Dallas Fed President Robert Kaplan saying overnight that recent headwinds were temporary and he expected the US economy to grow at 2% this year. That was in contrast to Bank of England Governor Mark Carney, who’s dovish comments on the UK economy pushed the Pound lower.
4. Aussie hits a ceiling: The Aussie dollar found more resistance above US76 cents, trading this morning at around US75.8 cents, which is towards the bottom of its recent trading range. Some more strength in the US dollar combined with a rough night for global stocks reduced appetite for the Aussie. 76 cents may prove to be short-term ceiling, with the AUD also facing headwinds from the recent pressure on iron ore prices and Moody’s re-rating of Australian banks.
5. Keep calm and carry on (investing in property): For those concerned about housing bubble risk, the Financial Review reports that KPMG’s Economics team said that house prices in Sydney and Melbourne are likely to cool, but the correction is unlikely to be steep. KPMG cited the number of investors and the effect of future population growth as key factors that make the current market different from previous falls.
6. Bitcoin market facing another crisis: The crypto-currency currency was established with a limit of 21 million coins, of which around 14 million have been mined. According to the Wall Street Journal, some market participants want Bitcoin to be used like a commodity with limited supply (like gold). Others want to use it more like a currency to facilitate transactions, which would probably involve increasing the 21 million limit. It may lead to a split, in which two versions of Bitcoin would then be traded. Regardless, Bitcoin prices shot higher overnight as the recent volatility continues.
You can find me on Twitter @Mr_SamJacobs.