To the scoreboard:
Dow: 21,750.73 -274.14 (-1.24%)
S&P 500: 2,430.01 -38.10 (-1.54%)
AUD/USD: 0.7888 -0.0045 (-0.45%)
ASX200 SPI futures (Sept contracts): 5,695 (-51)
Iron ore benchmark 62% fines $US75.41/t (+3.3%)
1. Global stocks get thumped: There was early selling in US markets on more political worries as the government was forced to deny that President Trump’s top economic advisor was quitting. Market fears were then exacerbated by the terrorist attack in Barcelona, and the S&P500 posted its second-biggest fall of the year.
2. Which sets the tone for a domestic sell-off: Futures traders have marked the ASX200 down heavily after a disappointing session yesterday. That would’ve been partly due to Telstra’s 10% fall after it announced a cut to its dividends (which may reflect a problem about Aussie investor attitudes). QBE Insurance also slumped 7% on investor concern about its emerging markets division. More broadly, the market couldn’t break out of its recent range, briefly climbing above 5,800 before falling back.
3. Playin’ it safe: The tone was risk-off across asset classes, with money flows moving into the Japanese yen (USD/YEN back below 110) and Swiss franc. Gold caught a bid and is back above $US1,290 an ounce, while a short time ago the yield on benchmark US 10-year treasuries stood at 2.185% — a fall of 10 basis points over the last two days.
4. Aussie dollar goes backwards: The AUD was tracking towards US80 cents yesterday evening following solid jobs data, but swiftly reversed course overnight. The sell-off extended to other commodity bloc currencies as base metals fell. Iron ore prices rose yesterday evening but futures dipped in overnight trade. This chart via Greg McKenna at AxiTrader shows the strong recent correlation between the AUD and prices on the Shanghai metals exchange:
5. ECB conundrum: Headline inflation for the Eurozone in July climbed by 1.3% overnight, in line with forecasts but still sluggish. There was strong employment data in Germany and France but given the European Central Bank’s mandate to only focus on inflation, a consistently low reading could affect the pace of stimulus withdrawal. The ECB would also be wary of a stronger euro creating headwinds for growth. The euro dipped by 0.4% against the US dollar overnight to $US1.1725.
6. Alibaba knocks it out of the park: Chinese e-commerce firm Alibaba beat analyst estimates, reporting a 56% increase in Q2 revenue to $US7.51 billion. While core e-commerce sales made up 86% of total revenue, the company is rapidly expanding its cloud business and its stock price is up 86% so far this year. Alibaba is also investing in physical stores, with CEO Jack Ma telling investors that brick-and-mortar retail will form a key part of the company’s strategy.
Bonus (Bitcoin) item: The world’s biggest cryptocurrency hit a new record high overnight of almost $US4,500 before falling back to around $US4,300. Bitcoin alternative Bitcoin Cash also had a strong session, a short time ago up more than 40% to $US424.
Enjoy your weekend, I’m on Twitter @Mr_SamJacobs.