To the scoreboard:
Dow: 21,899.89 +196.14 (+0.90%)
S&P 500: 2,452.51 +24.14 (+0.99%)
AUD/USD: 0.7914 +0.0002 (+0.03%)
ASX200 SPI futures (Sept contracts): 5,745 (+32)
Iron ore benchmark 62% fines $US79.65/t (-0.35%)
1. Greenback gets a bid: The US dollar index rose by 0.43% with solid gains against all major currencies. It follows yesterday’s USD sell-off as markets jockey for position ahead of this week’s meeting of central bankers in Jackson Hole. There’s also speculation that despite the recent political turmoil in Washington, momentum is building for the Trump administration to pass its proposed tax cuts.
2. But Aussie dollar hangs in: Like other G10 currencies, the AUD fell against the US dollar but is still holding above US79 cents. It performed well elsewhere, benefiting from more of a risk-on tone in overnight markets and continued strength commodities and base metals prices. There’s no major data out in Australia today, with ANZ’s quarterly “Stateometer” review of the states scheduled for 9am.
3. US stocks bounce back: Money moved back into US stocks on relative calm in Washington, and European and UK stocks also rose. The shift to a risk-on tone bodes well for the local index today with another 14 ASX200 companies including Woolworths set to report full-year earnings. With stocks in the US still near record highs, this note from Joe Ciolli is still worth a look – it shows that the big players are dominating the market, with the number of companies trading at annual lows now at an 18-month high.
4. Ripple in the crypto-waters: Bitcoin had a wild night, crashing to below $US3,700 before surging back. A short time ago it was back above $4,000, still off recent highs while off-shoot Bitcoin Cash is also lower. The most recent big moves among the major cryptocurrencies has been in Ripple (the world’s third biggest) which rocketed up by around 45% over the last two days.
5. Italian politics on the horizon: In line with the price action in other markets, bond prices fell and the yield on benchmark US 10-year bonds rose back over 2.2%. Italian bonds also caught the market’s eye in Europe, with the yield on Italian 10-years spiking by 7 basis points. That took the spread between German and Italian bonds to a five-week high, with a degree of caution still evident on the potential impact of the Italian election, which has to be held by March.
6. Iron ore out of puff? It’s been an impressive run, but spot prices late yesterday were mixed and futures markets fell by 4% overnight. Gold fell back to $US1,290 an ounce as it typically moves inversely to the US dollar but other base metals continued to climb – copper hit a three-year high with zinc and nickel also near recent peaks. Benchmark crude oil steadied at $US51.87 a barrel ahead of tonight’s weekly US inventory data.