To the scoreboard:
Dow: 25,520.96 -665.75 (-2.54%)
S&P 500: 2,762.13 -59.85 (-2.12%)
AUD/USD: 0.7926 -0.0114 (-1.42%)
ASX200 SPI futures (March contracts): 6,006 (-65)
1. It was a sea of red in global stocks on Friday night as equity markets got spooked by a sharp rise in bond yields, and the S&P500 had its biggest one-day points fall since 2008. That will make for a nervous start to the week for stock investors as earnings season gets underway, led by Commonwealth Bank (half-year) and Rio Tinto (full-year) results on Wednesday.
2. The bond selloff followed Friday’s US employment data, which showed wages climbed higher than expected, an indicator that inflationary pressures are rising. So benchmark US 10-year bond yields climbed sharply to close at a four-year high of 2.84% — a rise of 40 basis points since the start of the year:
3. AUD gets hammered: The spike in volatility and risk-off sentiment saw the Aussie get sold off across the board to end the week. Combined with the rise in bond yields — Australian and US 10-year yields are now almost at parity — which gave broad support to the US dollar, the AUD slumped by more than 1.4% to close the week at 0.7926 US cents.
4. Bitcoin had a typically wild weekend, crashing by 15% on Friday to below $US8,000. It then had an equally sharp rally, before slumping back to around $US8,000 this morning. Economist Nouriel Roubini said Bitcoin is “the mother of all bubbles“, while major US banks have banned customers from buying cryptocurrency on their credit card.
5. The week ahead: Key data domestically starts tomorrow with December retail sales figures (11:30am AEDT) followed by the RBA’s first interest rate announcement of the year (2:30pm AEDT). Looking abroad, the RBNZ and the Bank of England will also make interest rate announcements and there’s a wave of central bank speakers throughout the week. The full diary is here.
6. In commodity markets, the extra strength in the US dollar weighed on oil prices, with brent crude falling by 1.5% from its four-year high while base metals — gold and copper — also declined. But iron ore was immune to the global market jitters, as benchmark 62% fines followed steel prices higher to reverse their previous day’s falls with a 2.1% gain on Friday.
Have a good week.