To the scoreboard:
Dow: 21,812.09 -87.80 (-0.40%)
S&P 500: 2,444.04 -8.47 (-0.35%)
AUD/USD: 0.7906 +0.0002 (+0.03%)
ASX200 SPI futures (Sept contracts): 5,704 (+8)
Iron ore benchmark 62% fines $US77.82/t (-2.3%)
1. US dollar index dips by 0.4% after yesterday’s rise: New home sales data came in at the weakest level in seven months, and there was more political uncertainty as US president Donald Trump threatened to shutdown the government if Congress doesn’t legislate to fund the border wall with Mexico. The AUD is still holding above US79 cents amid a broad risk-off tone in currency markets, with the USD consistently dipping below 109 against the safe-haven yen for the first time since April before the French election.
2. Euro stronger ahead of Jackson Hole: Weakness in the USD was partly due to broad strength in the euro. Eurozone composite PMIs beat forecasts, suggesting the economic recovery is still on track. The head of Germany’s Bundesbank also took a more hawkish outlook on the ECB’s tapering of its asset purchase program. The euro is back above $US1.18 ahead of the meeting of central bankers in Jackson Hole which starts tonight, and reached an eight-year high against the pound.
3. Global bond demand still strong: The yield on benchmark US 10-year treasuries fell by 4 basis points to 2.17% as bond markets remain cautious about the global risk outlook. Gold also caught a bid and a short time ago was trading at $1,295 an ounce, back near $1,300 for the first time since November 2016.
4. Aussie stocks stay in range: The ASX200 once again confounded futures traders who had forecast a rise yesterday following a strong global lead. Instead stocks fell and the index remains stuck in the middle of its recent range between 5,650 and 5,800. US stocks slipped overnight, with trading volumes low on a quiet summer’s day. Earnings season continues in Australia with another 13 ASX200 companies set to report full-year results today.
5. Iron ore falls again: But futures markets are already climbing as Chinese demand for higher grade ore — which includes benchmark 62% fines, Australia’s main iron ore export — remains strong. Copper dipped slightly but base metals prices remain broadly elevated as zinc briefly hit a 10-year high. Crude oil rose by 1.4% to $52.57 as US oil inventories fell by another 3.3 million barrels following last week’s 8.9 million fall.
6. Credit default swaps (CDS) making a comeback? The structured debt product was made infamous as a key driver of the global financial crisis. It’s where the seller of a derivative receives additional payments from the buyer but takes on all the risk in the event of a default. According to the Financial Times, CDS contracts are on track to more than double this year as traders seek higher returns in the current environment of low volatility.
Bonus item: Goldman Sachs’ equities team has instructed how to make a killing from US stocks this September
Enjoy your day, I’m on Twitter @Mr_SamJacobs.