Good morning and happy Friday.
To the scoreboard:
Dow: 20,6663 +56 (+0.27%)
S&P 500: 2,366 +9 (+0.37%)
AUD/USD: 0.7419 +0.0001 (+0.01%)
ASX200 SPI futures (June contracts – 20 minute delay): 5,727 -3
Iron ore benchmark 62% fines: $US61.60 -$US0.60 (-0.97%)
1. Wild night on currency markets: The US started the overnight session lower but stormed back on good data, as jobless claims and the Philadelphia manufacturing index both beat expectations. The pound briefly topped $US1.30 after strong retail sales in the UK but then declined as the greenback made up ground against all the major currencies. After reaching $US0.7466 overnight, the AUD is back down to $0.7419 this morning. Despite the gains, the US dollar index is down almost 2% from a week ago:
2. Global markets steady the ship: After yesterday’s heavy falls due to chaos in Washington, buyers came back into US stocks while UK and European markets finished slightly lower. Despite ongoing political risk, which at the least has pushed back the government’s pro-growth reform agenda, a “buy the dip” attitude prevailed and money moved back into riskier assets. The probability of a June rate hike, according to CME’s Fedwatch tool, moved back to 73.8%. US 2 and 10-year bond yields rose slightly and gold was off by 0.8%.
3. And of course…there’s earnings: Another factor that’s helping to buffer US stocks is that companies are making money. The latest earnings season surprised to the upside and US stocks are on track to post earnings growth of around 14%, the best result since 2011. Although US stocks have also benefited from record federal bank stimulus and companies using low interest rate to raise debt and buy back shares, strong earnings are still are a good indicator that prices are justified:
4. Brazil in crisis: Brazil’s Bovespa stock index plunged by 8.8% on Thursday amid allegations of bribery against president Michel Temer. The index hit a trading halt after falling 10%, then re-opened and managed to climb back slightly. The popular exchange traded fund iShares MSCI Brazil Capped ETF crashed by a whopping 16.6%. Temer has so far resisted calls to resign and has denied the allegations. Brazil’s real crashed by almost 7% against the US dollar:
5. Australia today: Despite gains on the US market and yesterday’s positive jobs report, ASX200 SPI futures traders are unconvinced and have marked local stocks down 3 points. Greg McKenna from AxiTrader noted that traders may be wary after yesterday’s spike in volatility, as sharp movements like that in the market are rarely just a once-off. Trade in iron ore was choppy with benchmark spot prices falling slightly. With no major data releases today the AUD should hold above US74 cents.
6. Tech showdown in China: The first shots have been fired in a looming battle between Apple and Tencent Holdings, China’s most valuable company. Tencent’s multi-service chat app WeChat includes a feature where users can “tip” other users and send some yuan into their account if they like a particular post or photo. Apple argues each tip is like an in-app purchase, and wants a 30% cut. Tencent is displeased, and an interesting stoush is shaping up. Get the details here.
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