To the scoreboard:
Dow: 21,409.55 +14.79 (+0.07%)
S&P 500: 2,439.07 +0.77 (+0.03%)
AUD/USD: 0.7583 -0.0003 (-0.04%)
ASX200 SPI futures (Sept contracts): 5,668 (+2)
Iron ore benchmark 62% fines: $US56.75 Unchanged (Markets closed)
1. Aussie stays resilient: The AUD made another run towards US76 cents overnight before finding resistance. That was despite more support for the US dollar, which rose against most major currencies. USD buyers shrugged off more poor data, with durable goods orders falling more than forecast. That suggests traders are positioning around the US Federal Reserve this week. Two Fed speakers advocated a continuation of the Fed’s current strategy last night, and Fed chair Janet Yellen speaks tonight.
2. Stocks quiet again: Stocks in the US were flat, while financial stocks led European markets a little higher after the government rescue of two Italian banks. Futures traders have the local market little changed, which points to a quiet open, but without a strong lead from global markets the ASX200 may struggle to find traction given the recent downward momentum. Here’s a look the market over the past week:
3. Bonds hit a new low: Despite a relatively optimistic outlook on the global economy by the Bank of International Settlements on the weekend, The Wall Street Journal reports that 10-year US bond yields hit a new 2017 low of 2.13% overnight. While US stocks remain elevated with minimal volatility and the US dollar has found some recent support, demand for US treasuries is still strong as the bond market continues to doubt the anticipated pick-up in US inflation.
4. Choppy seas for the cryptos: Bitcoin fell by more than 10% overnight but has since rallied back above $US2,400. Recent trade has been volatile, and the US SEC’s decision on whether to allow a Bitcoin Exchange Traded Fund seemingly remains the next key event. In a rough start to the week for crypto-currencies, Ethereum is back below $US250 following last week’s flash crash.
5. Commodities wrap: Oil continues to build a base, after heavy selling over the last 5 weeks drove it to a 7-month low. Benchmark crude traded above $US46 before closing at $US45.83. Iron ore markets were closed for a holiday in China, and futures are little-changed. Gold traders got a shock overnight, when a huge sell order sent gold plunging below $1,240 an ounce before a mild recovery.
6. Warning signs for Australia: The move by the MSCI to include shares from the Chinese mainland in its global stock indexes is a warning sign for the Australian market. While the effects won’t be immediate, eventually the weighting of Australian stocks in regional indexes will be halved from 12% to 6%. According to this report in the Financial Times, the move is representative of a continued economic shift away from Australia, towards Asian trading centres like Shanghai and Hong Kong.
Bonus item: If you’re in the camp that thinks US stock values “don’t make any sense”, you’re not alone. Hedge fund Tourbillon Capital says gains this year in US stocks have run ahead of earnings and fundamentals. Have a read of their investor note here.
You can find me on Twitter @Mr_SamJacobs.