To the scoreboard:
Dow: 21,479.27 Unchanged (holiday)
S&P 500: 2,449.01 Unchanged (holiday)
AUD/USD: 0.7604 -0.0057 (-0.74%)
ASX200 SPI futures (Sept contracts): 5,738 (+6)
Iron ore benchmark 62% fines: $US63.23 (-1.75%)
1. AUD gets the wobbles: The Aussie dipped below US76 cents in overnight trade in the fallout from yesterday’s interest rate announcement by the RBA. Interest rates stayed on hold as expected, but the market had clearly priced in some expectation that RBA governor Philip Lowe join other central banks and adopt a more hawkish tilt. After Lowe’s neutral comments, the AUD finally found support at US75.9 cents after starting yesterday at US76.8 cents.
2. It’s calm out there: With the US on holiday, global markets were quiet with bond yields little changed while stocks in the US and Europe fell by around 0.3%. That points to a flat open for the local index after yesterday’s big gains, with banks leading the charge on news that South Australia’s bank levy will be blocked in the state senate. The 1.7% rise reflects some recent volatility in Australian stocks after the ASX200 fell by more than 1% the day before.
3. Global currency wrap: The euro is down about 1% from last week’s highs at US$1.135. ECB chief economist Peter Praet continued the bank’s attempts this week to try and temper expectations about the withdrawal of monetary stimulus, saying that current conditions are dependent on easy monetary policy. The USD and pound traded flat, while the Canadian dollar strengthened after Bank of Canada Stephen Poloz repeated the bank’s assertion that an interest rate rise is on the cards.
4. Data today: It’s a quiet day of data ahead in Australia, with Ai Group’s PSI Services Index to be released at 9.30am AEST. Regionally, China has Caixin PSI Services data following Monday’s manufacturing results and Japan will also release its services index. Later tonight, the US Federal Reserve releases the minutes from its June meeting, which could add context to the recent theme around the move by central banks globally to reduce liquidity in the market.
5. Commodities quiet: Iron ore fell back again after futures dipped in late trade yesterday, but the near term outlook remains positive as Chinese steel mills continue to operate with strong margins. Oil was little changed, with benchmark crude holding just below $US50 a barrel. Prices have stabilised over the last couple of sessions as the market re-balances following a 9% rally.
6. Gold finds a buyer: Gold caught a small bid and is back above $US,1220 an ounce, but a rise in global bond yields and some good sessions for the US dollar have combined to push gold 2.4% lower over the past week. Demand this morning was perhaps in response to the latest geo-political tensions involving North Korea, which tested a missile overnight that has the capacity to reach the US or Australia.