Good morning. Here’s what Aussie traders will be talking about this morning.
To the scoreboard (8:00am AEDT):
Dow: 20,881 -22 (-0.10%)
S&P 500: 2,374 +1 (+0.04%)
SPI 200 Futures – March (20 minute delay): 5,772 +17 (+0.29%)
AUDUSD: 0.7571 +0.0029 (+0.38%)
1. US bonds crash: US bond yields rose overnight ahead of the US Federal Reserve’s interest rate decision this week (Thurs 5am AEDT). With a March rate rise already fully priced in, traders will be watching the Fed chair Janet Yellen’s statements carefully for any clues about the pace of further rate increases later this year. Yields on US 10-year note rose more than 1% to be trading at 2.609% this morning Australian time. For bond investor Bill Gross, the break over 2.6% is a key indicator that the 30-year bull market for bonds is over.
2. Iron ore is back: Iron ore posted its first day of gains in a week, as benchmark 62% fines jumped by 1.78% to $88.26 a tonne following further gains in steal prices. Whether by speculative forces or fundamentals, the May futures contract for iron ore gained 4.86% in the session. Zinc and copper both gained more than 1% in overnight trading and gold is also up. The AUD has benefited from stronger commodity prices and rose against most major currencies, gaining more than 0.5% overnight against the Yen and Euro.
3. Oil rout continues: Oil continued its recent slide overnight as traders continue to unwind bullish long positions amid doubts about the capacity of OPEC’s productions cuts to offset the current supply glut. Benchmark crude futures were trading just above $51 after falling to $50.85, the lowest level since November 30. West Texas Intermediate prices dipped further under $50 to $48.32 a barrel. Traders will be watching the US Energy Information Authority’s weekly Petroleum Status Report (Thurs 1:30am AEDT) for more data about US shale supplies. Although the oil price is tipped to rise in the 2nd quarter of 2017, there are risks the US supply increase combined with the Trump administration’s protectionist stance could start a price war once OPEC production cuts stop at the end of June.
4. Data today: The NAB Business Survey will be released this morning (11:30am AEDT). Traders will be watching to see if there’s a continuation of the strong February results. Later tonight the US has Producer Price Index data (11:30pm AEDT).
5. Pound gains as Brexit gathers steam: The sterling reached 1.2266 (up 0.46%) against its US counterpart, and is now expected to push towards 1.23 having broken out of its recent trading range. The FTSE also rose 0.33% on the back of more certainty about Brexit, as the May government rejected amendments to the proposed bill which will trigger the UK’s split from Europe. The House of Lords is now expected to pass the bill in its current form. Scotland announced plans for a second independence vote overnight, but the effect on the markets was muted.
6. Stock investors more fearful: The Credit Suisse fear barometer rose 10 points last week to 35.6, it’s highest level since the day after the US election on November 9. The bank measures 3-month options on the S&P 500 to gauge the extent to which investors are covering for downside risk. It follows Gluskin Sheff chief economist David Rosenberg, who released a note on Friday outlining a list of reasons why the stock market was overvalued. Both reports cited an increase in the spread on US corporate bonds as a key risk factor.