Good morning. To the scoreboard:
Dow: 20,650 -13 (-0.06%)
S&P 500: 2,359 -4 (-0.16%)
ASX SPI200 Futures – June (20 minute delay): 5,849 -10
AUD/USD: 0.7602 -0.0001 -0.01%
Iron ore benchmark 62% fines: $US79.36 -$US1.03 (-1.28%)
1. Risk off: The yield on US 10-years fell by around 7 basis points to 2.32% overnight, driven by risk-off sentiment and portfolio re-allocations into bonds at the start of the new quarter. 10-year yields closed at their lowest level since February 27. Despite positive global manufacturing data, markets took a slightly more risk-off position at the start of Q2 2017 overnight pending key developments later in the week, including minutes of the US Fed’s March meeting (Wednesday) and Donald Trump’s with Chinese leader Xi Jinping on Thursday and Friday.
2. Data today: In Australia the RBA announces its interest rate decision at 2:30pm AEST, and nobody’s expecting much out of that. February balance of trade data comes out at 12:30pm AEDT. Later today the US also has trade balance figures, with factory/durable goods orders for February and US Federal Reserve Board Member Daniel Tarullo will speak at Princeton University. Europe reports February retail sales.
3. “Stormy weather in Shortville”: Elon Musk sent out this cheeky tweet to the bearish Tesla analysts, after the company posted an annual 69% increase in vehicle delivery and Tesla stock surged by over 7%. Musk has recently focused on strategic partnerships to enter into the Chinese market for electric cars, with Chinese conglomerate Tencent Holdings last week buying a 5% stake in Tesla for $US1.7 billion.
4. Iron ore is tumbling: The fall continues, as benchmark 62% fines fell under $80 per tonne for the first time since early January. Futures trading will stay quiet until Wednesday while China celebrates a two-day holiday festival. The AUD lost 0.3% against the greenback overnight after yesterday’s poor retail sales data. The weaker lead from global markets combined with drop in iron ore and the AUD is expected to weigh on the Aussie share market today, with ASX 200 futures down 10 points.
5. Bond markets would be unwise to ignore the Fed: Global bond markets are not accurately pricing in the most likely scenario of two more rate increases in 2017, leaning in favour of more hikes not less. According to Mohammed El-Erian, focus has drifted away from the Fed’s guidance as markets make bets on key political outcomes, such as the Trump administration’s market-friendly reforms and the upcoming French election. If political events fail to play out as expected, the resulting bond market volatility could also roil global stock markets, El-Erian said.
6. Global debt hits a lazy $215 trillion: Global debt grew by $7.6 trillion in 2016 to reach $215 trillion, the Institute for International Finance said. Reuters reported that total debt now accounts for 325% of global GDP. The rise was driven by a sharp increase in debt issued by emerging markets which rose to $55 trillion. The remaining $160 trillion was issued by developed economies, equivalent to 390% of those countries’ GDP.