To the scoreboard:
Dow: 23,328.63 +165.59 (+0.71%)
S&P 500: 2,575.21 +13.11 (+0.51%)
AUD/USD: 0.7819 -0.0061 (-0.77%)
ASX200 SPI futures (December contracts): 5,895 (+5)
1. US tax changes get traders’ attention: There were sharp moves across US stocks, bonds and the USD on Friday, following news that the US Senate had cleared the way for the Republican party to initiate tax-cut legislation. The US dollar index rose by 0.42% as the greenback posted strong gains against the euro and commodity bloc currencies including the Aussie dollar.
2. Bond market awakens: The yield on benchmark US 10-year treasuries also rose sharply, climbing six basis points to 2.38%. Greg McKenna from AxiTrader said 2.40-2.42% represents the next key level of resistance, as the US Fed remains on track to raise rates amid a positive global growth backdrop.
3. Abe scores impressive victory: Japanese Prime Minister Shinzo Abe’s decision to call an early election was rewarded, as the ruling coalition led by Abe’s Liberal-Democrats secured a two-thirds “super majority” in Parliament. The win will allow the government to refocus on its economic stimulus agenda to boost growth. Following the result, the USD is pushing higher against the yen in early trade.
4. US stocks hit another record: The stock market’s reaction to the tax cuts was positive, as traders focused on the potential for a boost in growth while Q3 earnings season is off to a strong start. Futures traders have marked up the local index slightly after it closed above 5,900 on Friday for the first time since early May.
5. The week ahead: Following the strong move in the US dollar on Friday, the AUD starts the week close to US78 cents, with all eyes on September inflation data scheduled for Wednesday 11:30am AEST. The other key event this week will be the ECB’s meeting to discuss the tapering of its asset purchase program. Full diary is here.
6. Commodities wrap: Iron ore prices got a boost on Friday but futures markets suggest those gains will be short-lived. Gold fell to $US1,280 an ounce amid a stronger USD and rising bond yields, while oil prices remain supported due to reduced supply from Kurdish-controlled northern Iraq. Also in the US, the Baker Hughes oil rig count fell for the third straight week.
Bonus item: There’s been increasing chatter in markets about who the next chair of the US Federal Reserve is going to be, but a US economist told Business Insider that it doesn’t really matter. Here’s why.
Enjoy your day. I’m on Twitter @Mr_SamJacobs.