Good morning and happy Friday.
To the scoreboard:
Dow: 23,400.86 +71.40 (+0.31%)
S&P 500: 2,560.40 +3.25 (+0.13%)
AUD/USD: 0.7661 -0.0043 (-0.56%)
ASX200 SPI futures (December contracts): 5,908 (+10)
1. ECB with a dovish taper: Europe’s central bank said monthly bond purchases would be halved to 30 billion euros as expected, but ECB president Mario Draghi left the asset purchase program open-ended and said that maturing bonds in the ECB’s portfolio would be reinvested. The dovish sentiment saw the euro fall by more than 1% against the US dollar:
2. Bond markets respond: US 10-year bond yields remain elevated at 2.46% this morning, their highest level since March this year, as House Republicans narrowly passed the Senate’s budget resolution bill. That will help clear the way for tax reform to be fast-tracked. Aussie 10-years are back above 2.8%, while government bonds across Europe rallied with yields on German 10-year bonds falling around six basis points to 0.42%.
3. AUD gets hammered again: A combination of weakness in the euro and higher bond yields helped drive a 1% move in the US dollar index which is now back above 94. Amid broader US dollar strength combined with this week’s soft inflation report, the Aussie fell through technical support and is now trading below its 200-day moving average:
4. Global stocks rise: The pan-European STOXX600 rose by more than 1% in the wake of the ECB announcement. In the US, the Dow and S&P500 climbed while the NASDAQ closed lower but Amazon, Google and Microsoft all reported solid earnings beats after the closing bell, led by Amazon whose shares soared by more than 7% in after-hours trade.
5. Data today: Domestically, the ABS has PPI figures for September. During Asian trade, Japan will report CPI inflation and later tonight the US will get a first reading for Q3 GDP, with the consensus forecast for real GDP growth of 2.5% in the September quarter.
6. Oil hits a 27-month high: Benchmark crude prices closed up 1.5% for the day at $US59.30 a barrel, as discussions from earlier in the week about another extension to OPEC supply cuts continue to drive the recent price action. Iron ore continues to fall, while higher bond yields and strength in the USD are keeping downside pressure on gold.
Enjoy your weekend, I’m on Twitter @Mr_SamJacobs.