Good morning and happy Friday.
To the scoreboard:
Dow: 21,134 +136 (+0.65%)
S&P 500: 2,430 +18 (+0.36%)
AUD/USD: 0.7378 -0.0050 (-0.65%)
ASX200 SPI futures (June contracts): 5,770 (+17)
Iron ore benchmark 62% fines: $US55.97/t -$US1.05 (-1.84%)
1. Stock bulls are still up and about: Global stocks rose overnight, led by gains in US markets which hit new record highs after a string of good data points. Private payrolls in the US surged ahead in April, and the ISM manufacturing data also beat expectations. With bond yields remaining low and key data showing no signs of a significant slowdown, capital continues to move into global equities. The gains should filter through to the local index, with traders marking the ASX200 up by 17 points.
2. AUD on the precipice: The Aussie dollar was weaker, with markets positioning ahead of what may be a negative print for Q1 GDP. The Aussie fell on the back of weak manufacturing data in China, and couldn’t get back up. The growth in US payrolls sets the scene for a strong employment report later tonight (read a preview here), which is the last impediment to a June rate hike. That led to a good session for the USD, which saw gains across the board, although the euro is still finding support above $US1.12.
3. China unlocks door for Bitcoin: Bitcoin was back in focus last night, surging ahead again on news that Bitcoin exchanges in China would now allow holders of the cryptocurrency to withdraw funds from their Bitcoin accounts. It frees up liquidity in Chinese markets, after Bitcoin owners were told in February that they were not allowed to withdraw funds. After falling from last week’s record highs and having a few quiet sessions, Bitcoin subsequently surged back above $US2,400.
4. Crude lower despite a big draw: Oil rose briefly overnight as US inventory drawdowns came in at 6.4 million barrels against a forecast of 2.5 million. It wasn’t enough to offset continuing concerns about over-supply in the global market, and both West Texas Intermediate (WTI) and benchmark crude declined late in the session. Reuters revealed that OPEC considered deeper cuts when it agreed on last week’s extension, but decided to see how the market reacts first.
5. Iron ore can’t find a floor: Iron ore took another battering overnight, and benchmark 62% fines are now holding just above $US55 a tonne. With steel production remaining high as of mid-May, buyers reduced their purchase volumes in the hope that prices would fall further. Spot prices also wouldn’t have been helped by poor Chinese manufacturing data yesterday, although there was a small glimmer of hope with futures finally in positive territory.
6. No love for US banks: Despite new record highs on the S&P500, US bank stocks haven’t been joining the party. Although banks found buyers overnight as markets were buoyed by good data, the KBW Bank Index lagged the index for the previous five days. After rising 32% in the wake of the US election, bank stocks have since fallen by 10% as the “Trump Trade” wears thin and markets doubt the ability of the Trump administration to initiate bank-friendly reforms.