To the scoreboard:
Dow: 22,370.80 +39.45 (+0.18%)
S&P 500: 2,506.65 +2.78 (+0.11%)
AUD/USD: 0.8010 0.0049 (0.62%)
ASX200 SPI futures (Sept contracts): 5,727 (+13)
Iron ore benchmark 62% fines: $US68.85/t (-4%)
1. More of the same: Overnight price action saw a continuation of recent trends, with no major moves ahead of the main event this week on markets — the US Federal Reserve’s policy announcement later tonight (AEST). Each of the broader themes from recent weeks remained in play — US stocks rose slightly to close at (yet another) record high, the US dollar faced mild selling pressure and government bond yields continued to edge higher.
2. Aussie holds on: The AUD is back above US80 cents this morning, after a strong session overnight along with other commodity bloc currencies. That’s despite another sharp fall in spot prices for iron ore last night, with benchmark 62% fines now down more than 8% since last week. Base metals provided some support with copper and zinc edging higher, while benchmark crude oil dipped by 0.5% from its 5-month high.
3. ECB is split: Ahead of the US Fed’s announcement tonight on interest rates and tapering of its bond purchases, sources told Reuters that the European Central Bank may extend its bond purchasing program to next year. The report indicates that ECB members are split in their view of how to proceed, with the recent upward bias in the euro a key concern for those on the dovish side.
4. Brace for turbulence: With US stocks happily climbing to new record highs amid low volatility, traders are still betting on a spike in the VIX index — if not straight away then soon. The spread between the 3-month VIX index and its 30-day counterpart is now at its highest level in five years (not surprisingly, that 3-month time frame includes the next earnings season and the deadline for the US debt ceiling).
5. Bitcoin, bubbles and billionaires: Add hedge fund manager Ray Dalio to the list of billionaires and finance luminaries calling bitcoin a bubble. Prices dipped back below $US4,000, with money moving back into off-shoot Bitcoin Cash which jumped by more than 10%. Meanwhile, Ethereum creator Vitalik Buterin expects the network to start taking market share from Visa and Mastercard as soon as next year.
6. Data today: Aside from the US Fed later tonight, RBA assistant governor (economic) Luci Ellis will give a speech today at the Australian Business Economists lunch. There’s also Japanese trade data for August, and later tonight Germany has producer price inflation (PPI) data and the UK has retail sales.
Enjoy your day, I”m on Twitter @Mr_SamJacobs.