6 things Australian traders will be talking about this morning

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Good morning.

To the scoreboard:

Dow: 21,080 -2.67 (-0.01%)
S&P 500: 2,416 +1 (+0.03%)
AUD/USD: 0.7440 -0.0007 (-0.09%)
ASX200 SPI futures (June contracts): 5,763 (+7)
Iron ore benchmark 62% fines: $US57.91 -$US2.33 (-3.87%)

1. Global markets creep higher: The S&P500 nudged higher on Friday, as Q1 GDP figures in the US were revised upwards with stronger consumer spending numbers. London’s FTSE also hit a new record high as UK stocks benefitted from a weaker pound (see below), stemming from uncertainty around next month’s election with polls suggesting it could be closer than expected. With share market volatility still at record lows it points to a steady open for Asian markets, and ASX traders have marked the local index up slightly.

2. Testing times for Australian assets: Last week saw multiple banks downgrade their forecasts for Q1 GDP, with the prospect of negative growth not out of the question. Data this week on building approvals, retail sales and capital expenditure will provide more context ahead of the GDP figures next week. In the meantime, pressure on stocks and the Aussie dollar will likely continue while government bonds continue to see more demand.

3. Iron ore is in the wars: The big miners are unlikely to lead strongly this morning after iron ore fell sharply again on Friday. Spot prices for benchmark 62% fines from Metal Bulletin held steadfastly above $US60 a tonne for weeks, but another 3.9% crash saw prices fall to $US57.91 – their lowest since last October. It was an unusual day of trade however, as lower grade 58% fines actually rose on low volumes ahead of a Chinese holiday weekend.

4. G7 irks Merkel: German Chancellor Angela Merkel went on the offensive after meetings of G7 nations over the weekend. Calling the meetings “difficult” and “unsatisfactory”, Merkel said that Germany and Europe more broadly would be unable to rely on their traditional partners to shape Europe’s future. It’s worth noting given the increasing role that political volatility is playing in short-term market moves. More details here.

5. Elliot saves for a rainy day: Elliot Management, the hedge fund run by billionaire Paul Singer, raised $US5 billion earlier this month which it’s holding as a cash reserve. Elliot, which recently made headlines in Australia when it circled BHP, said it’s raising the cash in anticipation of opportunities from more market volatility. It said that central bank stimulus has buffeted assets prices, noting that “the low-volatility levitation magic act of stocks and bonds will exist until the disenchanting moment when it does not”.

6. China stays low-key: China’s currency has kept a relatively low profile this year, moving more or less in step with the US dollar. Still, this post from the Financial Times shows that Chinese authorities have managed to engineer a fall in the renminbi of 2.5% against a basket of currencies this year, while remaining more or less pegged to the US dollar. Using subtle measures to weaken the currency helps China’s huge export industry, while maintaining the US dollar exchange rate achieves the government’s aim of reducing capital outflows.

Bonus Bitcoin chart: The crypto-currency saw heavy volatility over the weekend, falling all the way below $US2,000 before recovering:

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