To the scoreboard:
Dow: 20,689 +39 (+0.19%)
S&P 500: 2,360 +1 (+0.06%)
ASX SPI200 Futures – June (20 minute delay): 5,871 +27
AUD/USD: 0.7560 -0.0003 -0.04%
Iron ore benchmark 62% fines: $US79.45 +$US0.09 (+0.11%)
1. Risk-off appetite remains in markets: Risk-off remains the order of the day to start the new quarter. Global markets were quiet overnight with US bond yields moving slightly off their lows and capital moving into the Japanese yen and gold. Markets are taking a wait-and-see approach pending key developments later this week, led by meetings on Thursday and Friday between US president Donald Trump and Chinese leader Xi Jinping.
2. ASX points skyward but the dollar is under pressure: US stocks made some late gains and London’s FTSE climbed by 0.54% as the pound dropped overnight. Despite relative calm in global markets, ASX futures traders have priced in a 27 point increase for the ASX this morning. The AUD fell as low as US75.42 cents in European trading before finding some support in the New York session. The currency remains under pressure after falling briefly below its 200-day moving average overnight.
3. Oil price flies higher: Benchmark crude futures closed 2% higher at $US54.17 after the price broke above its 100-day moving average overnight. An unexpected halt to supply at a British oilfield in the North Sea, along with analysts forecasting a drop in US inventories combined to drive the price higher. Reuters reported that UBS analysts predicted the price will rise to over $US60 a barrel over the next three months as OPEC production cuts work through the supply chain.
4. Dimon’s warning: In his annual letter to shareholders, JP Morgan chief executive Jamie Dimon said that “something is wrong” in America and highlighted a number of areas where the country can improve. Interestingly, Dimon’s key points sound like what you might hear at a Bernie Sanders rally. His concerns included America’s high military spending, high health care costs and excessive student loans. See the full list here.
5. Data today: The Australian Industry Group releases Performance of Services Index (PSI) data at 9.30am AEDT. A televised debate between the French presidential candidates is underway this morning, with markets watching for signs of political upheaval in the Eurozone. The US has the ADP employment report for March (an accurate predictor of non-farm payroll data on Friday) and the weekly EIA Petroleum Status Report (3.30am AEST) will be closely watched for movements in US oil inventories. At 2pm EST (4am AEST) the Federal Reserve will release the minutes from its March meeting.
6. Corporate bonds may come back to bite investors: In the post-global financial crisis world of low interest rates, the Financial Times reports that US companies have issued record amounts of cheap debt which investors were more than happy to buy. Over time, the terms to maturity of the debt have become longer which could come back to bite bond investors if inflation rapidly picks up and they are stuck holding long term debt with low inflation-adjusted returns. This chart shows the term length and total dollar amount of US corporate debt issuance: