To the scoreboard:
Dow: 21,478.17 -1.10 (-0.01%)
S&P 500: 2,432.54 3.53 (+0.15%)
AUD/USD: 0.7604 +0.0001 (+0.01%)
ASX200 SPI futures (Sept contracts): 5,726 (+21)
Iron ore benchmark 62% fines: $US63.28 (+0.08%)
1. Oil slips and falls: Benchmark crude fell by 3.7% to $US47.79 and US WTI crude prices were more than 4% lower. Despite the supply cut extensions, both OPEC production and exports remain high according to Reuters. But there was no major shift in fundamentals, and the price action suggests that oil has reached the top of its recent range after rallying by almost 10%.
2. No surprises from the Fed: The minutes from the US Federal Reserve’s June meeting showed that the bank’s committee members are split on two key issues: the pace of rising inflation and how to address the pace of stimulus withdrawal. Taken in summary though, the minutes provided no evidence of a change in market expectations around the Fed’s forward guidance, which is for balance sheet withdrawal to likely commence in September and one more interest rate hike on the cards for 2017.
3. No big moves on the markets: Currency and bond markets had a minimal reaction to the US Fed minutes. The US dollar index crept 0.1% higher, with the pound and euro little changed. The AUD is still holding just above US76 cents, as traders await key data events later in the week. US 10-year treasuries fell slightly by 2 basis points to 2.33%.
4. Global stocks stay calm: Tech stocks continued their recent volatility by rising 0.8%, but that was offset by a 2% fall in the energy sub-index. Stocks in the UK and Europe both rose, and ASX futures traders have priced the local market higher. Global financial stocks rose overnight, while for resources stocks both iron ore and gold were little changed.
5. Data today: Australia has May international trade data from the ABS at 11.30am AEST, after the trade surplus narrowed sharply in April due to a fall in exports. Later tonight the European Central Bank releases the minutes from its June meeting, and traders will be watching for US private sector employment, with forecasts for 185,000 jobs added in June.
6. Stocks bull-run has further to travel: Private sector payrolls are a key indicator for Friday’s employment report in the US, where the focus will shift to wage growth. HSBC is forecasting wage growth of 2.6%, according to the Financial Times. Higher wage growth may encourage the Fed to adopt a more hawkish stance which could weigh on equities, but analysis by Citi suggests that the overall health of the global economy should underpin a further 9% rise in global stocks by the middle of next year.