To the scoreboard:
Dow: 21,613.43 +100.26 (+0.47%)
S&P 500: 2,477.08 +7.17 (+0.29%)
AUD/USD: 0.737 +0.0001 (+0.01%)
ASX200 SPI futures (Sept contracts): 5,705 (+42)
Iron ore benchmark 62% fines: $US69.48 (+2.4%)
1. Currencies hop around: The euro briefly broke through $US1.17 for the first time since January 2015, but closed lower as the US dollar index made a late rally back above 94. The euro’s early strength was driven by good data for German business conditions, which hit a new record high. Although still trading around recent lows, the USD found some support as US consumer confidence data came in at the strongest level in 16 years. But Bank of America think the greenback is still overvalued by 10%. The Aussie dollar is holding steady above US79 cents ahead of a huge day of data.
2. It’s all about CPI: Buckle up for the release of quarterly CPI inflation data at 11:30am AEST. David Scutt’s 10-second guide has everything you need to know. Just 90 minutes later, a second key market-moving event takes places with RBA Governor Philip Lowe giving a speech in Sydney. Later tonight the US Federal Reserve will makes its interest rate announcement. No change is expected but as usual, markets will analyse the accompanying statement for clues on the Fed’s economic outlook.
3. Oil the big mover: It was another solid night for commodities, led by oil with benchmark crude up 3.3% to close back over $US50 a barrel. US WTI crude also rose more than 3%, as prices were bolstered by indications that US shale oil production is starting to slow, while Saudi Arabia maintained its pledge to cut exports. Copper hit a 2-year high above $US6,000 a tonne with reports that demand from China remains strong, while benchmark iron ore moved back towards $US70 a tonne with futures markets pointing to further gains ahead.
4. And bond yields rise: In line with more of a risk-on theme overnight, bond prices fell and yields rose across most major markets. Benchmark 10-year US treasuries rose by 8 basis points to 2.32%, as the Federal Reserve kicks off its two-day meeting on interest rate policy settings. Markets are also monitoring the passage of healthcare legislation in US parliament, where a successful vote would put the Trump administration’s pro-growth fiscal policies back on the agenda. Australian 10-year bonds rose 8 basis points to 2.78%.
5. Stocks go (even) higher: US stocks shrugged off higher yields and the positive consumer data had little impact, as the S&P500 closed at yet another record high. While the NASDAQ was little changed, major companies in other industries surprised on the upside with strong earnings. The VIX volatility index closed at 9.43, only just above its all-time record low. Stocks in Europe were also higher, and moves in global markets bode well for the ASX200 given the strong gains in commodities overnight.
6. Major cryptos fall back to earth: Bitcoin slumped back below $US2,500 before staging a mild rally this morning, while Ethereum crashed by around 15% to fall back below US$200 overnight. While overnight price action was choppy, Goldman Sachs said that Bitcoin prices will swing around a bit before making another run above the bank’s predicted price target of $US3,000.
Enjoy your Wednesday, you can find me on Twitter here.