To the scoreboard:
Dow: 22,296.09 -53.50 (-0.24%)
S&P 500: 2,496.66 -5.56 (-0.22%)
AUD/USD: 0.7935 -0.0002 (-0.03%)
ASX200 SPI futures (December contracts): 5,685 (+14)
Iron ore benchmark 62% fines: $US63.06/t (-0.8%)
1. US dollar on the rise: The greenback strengthened in overnight trade, as uncertainty stemming from the rise of a populist far-right party in Germany’s weekend election continued to weigh on the euro. Political uncertainty hit the Kiwi dollar even harder, which dropped by more than 1% while the Aussie dollar has started the day around 0.3% lower against the greenback.
2. Safety first: A tone of caution remains on markets after North Korea called Donald Trump’s latest threats a “declaration of war“. Gold is back over $US1,300 an ounce despite strength in the dollar, and safe-havens the Japanese yen and Swiss franc were the only major currencies the USD didn’t rise against. Amid the geo-political uncertainty, Japanese Prime Minister Shinzo Abe has also called a snap election for next month. Bonds saw more demand, with the yield on benchmark US 10-year treasuries falling 4 basis points to 2.22%.
3. And while we’re on bonds: Opposing comments from US Fed committee members overnight show that policy makers are split on the outlook for US inflation. ECB president Mario Draghi also spoke overnight, and said a “substantial degree of monetary accommodation is still needed,” while adding that the recent strength in the euro adds a layer of uncertainty to the economic recovery.
4. Stocks lower: Geo-political uncertainty also weighed on the appetite for global equities, as the S&P500 lost more than 0.2% led by falls in tech stocks. Despite the weak lead, ASX futures traders are optimistic this morning after the local index tailed off yesterday to finish flat. This chart from AxiTrader’s Greg McKenna clearly shows how range-bound the ASX200 has been this year, stuck in the same wedge since May:
5. Oil hits a two-year high: Oil shot up another 3.8% overnight to close at $US59.02 a barrel, its highest level since mid-2015. While OPEC supply cuts start to tighten the global supply picture, prices were also driven overnight by threats from Turkish president Erdogan to cut supply from Kurdish oil fields. Iron ore fell again overnight but futures have stabilised for now.
6. Bitcoin safe-haven? The cryptocurrency got another boost overnight — as it did the last time geo-political conflict between North Korea and the US threatened to escalate. It climbed almost $US300 overnight and is threatening to break back through $US4,000.
Enjoy your day, I’m on Twitter @Mr_SamJacobs.