Good morning and happy Friday.
To the scoreboard:
Dow: 21,083 +71 (+0.34%)
S&P 500: 2,415 +11 (+0.44%)
AUD/USD: 0.7456 -0.0041 (-0.64%)
ASX200 SPI futures (June contracts): 5,792 (-3)
Iron ore benchmark 62% fines: $US60.24 -$US0.28 (-0.46%)
1. Oil gets drilled: As expected, OPEC agreed to extend its production cuts overnight for nine months until 2018. Then oil prices promptly crashed, with both benchmark crude and West Texas Intermediate (WTI) falling by over 5%. Reuters reported that investors were hoping for deeper productions cuts in addition to the extension. The oft-used strategy of “buy the rumour, sell the fact” also looks to have been in play, as traders bid up prices prior to the meeting and then booked profits.
2. Another record in the US: The fall in oil didn’t impact US stocks, which posted gains for the sixth straight session as more company earnings beat expectations. The S&P500 and the NASDAQ both hit new record highs, and US stocks paced global markets overnight. The ASX200 looks set for a lower open, as the local market struggles to gain traction with doubts creeping in about the strength of its largest sectors, namely banking. This chart from Greg McKenna at AxiTrader shows the recent divergence between US and Australian markets:
3. Aussie rejected: The Aussie dollar was the biggest loser among G10 currencies overnight, falling by around 0.7% to US74.56 cents. Yesterday’s highs above US75 cents were rejected, and the move precipitated the fall in oil which suggests traders have doubts about the underlying strength of the Aussie. The US dollar index was little-changed, while the Canadian dollar and Russian ruble — both petro-linked currencies — each fell by more than 0.5% after OPEC’s announcement.
4. Bitcoin gets on the roller-coaster: And holders of the crypto-currency won’t want to get off yet. It climbed above $US2,700 before fluctuating wildly overnight, falling to around $US2,300 before rallying back above $US2,600. With observers continuing to watch closely as the market develops, here’s a useful guide on what bitcoin actually is.
5. Bad odds for commodities: Spot prices for benchmark 62% fines fell again yesterday evening, and losses on lower grade ore were even steeper with 58% fines falling by 2.57% to $US38.99 a tonne. That may be due to recent changes in Chinese production, with authorities phasing out less efficient induction furnaces for steel processing. Iron ore futures fell again overnight, and the pressure on prices suggests that the big miners are unlikely to drive gains on the local market today.
6. Strong evidence of a tech-takeover: With the US stock market at a record high, further analysis of growth in 2017 shows that the rally has largely been tech-driven. While the S&P500 is up 8% this year, the Financial Times reports that tech stocks are up 20%. Adjusted for tech gains, the market has only climbed by 1.4%. Hedge funds are doubling down on proven winners in the tech space, with names like Apple, Amazon and Facebook up more than 30%.