To the scoreboard:
Dow: 25,309.99 +347.51 (+1.39%)
S&P 500: 2,747.30 +43.34 (+1.60%)
AUD/USD: 0.7838 -0.0007 (-0.09%)
ASX200 SPI futures (March contracts): 6,004 (+39)
1. Bonds rally: Benchmark US 10-year yields dropped 5 basis points to 2.87% on Friday night, after the US Federal Reserve’s twice-yearly report to Congress. The Fed’s report gave no indication that it’s leaning towards an extra rate hike at this stage, with markets currently pricing in slightly less than 3 rate increases in 2018.
2. Amid the fall in bond yields, there was more risk appetite in global stock markets on Friday night. Following a strong finish for US stocks, the local index looks set to build off last week’s 1.6% gain when markets open this morning. ASX200 reporting season is largely complete and one third of companies beat earnings expectations — a big jump from 14% in August.
3. In currencies, the US dollar index edged higher off its recent lows on Friday night, but the AUD managed to trade flat for the session, finding support from the risk-on sentiment in global markets. The UK pound and Canadian loonie had the biggest moves, as Theresa May secured party consensus for Brexit trade negotiations while January inflation in Canada beat forecasts.
4. The week ahead: It’s a relatively quiet week domestically, with key data led by Thursday’s private sector capital expenditure figures for the December quarter. Internationally, the focus will be on Jerome Powell’s testimony before US Congress on Wednesday night — his first major appearance as chair of the US Federal Reserve. The full calendar is here.
5. Warren Buffett’s annual shareholder letter is always a fun read (this one’s a bit shorter — 16 pages, down from 29). Among the jewels of wisdom, Buffett said investment portfolios skewed towards bonds over stocks are flawed. He added that Berkshire Hathaway struggled to deploy its $US100 billion cash pile last year, because all the potential deals looked too expensive.
6. Global wrap: In commodities, crude oil rose more than 1% and hit a two-week high above $US67 a barrel. Benchmark iron ore prices also rose, finishing the week at their highest level since January 11 while pressure remains on lower grade ores. And in cryptos, the market came under pressure over the weekend as bitcoin slumped back below $US10,000.
Have a great week.