To the scoreboard:
Dow: 21,136 -48 (-0.23%)
S&P 500: 2,429 -7 (-0.28%)
AUD/USD: 0.7511 +0.0024 (+0.32%)
ASX200 SPI futures (June contracts): 5,682 (+15)
Iron ore benchmark 62% fines: $US56.03/t +$US0.13 (-0.23%)
1. Reflation trade over?: It looks like it if bond demand is anything to go by, with the yield on US treasuries down almost 9 basis points since the start of June to 2.15%. There was a general tone of uneasiness in markets overnight as money moved into traditional safe haven trades. Japan’s yen rallied by more than 1%, as the USD/YEN fell back below 110 for the first time since late April. Gold is at $US1,296 an ounce, up from $US1,270 at the start of June. Perhaps not surprisingly, shares in the US and Europe tracked lower amid a higher degree of uncertainty.
2. Aussie stocks may get left behind: ASX traders have marked the local index up, hoping some buyers will emerge after big sell-offs in recent sessions. AxiTrader’s Greg McKenna notes the recent falls may well be due to a global re-rating of Australian shares as the economy faces headwinds. Yesterday’s selling saw the ASX200 fall through the latest technical support level at 5,680. The Aussie dollar is back over US75 cents this morning as the demand for US treasuries continues to weigh on the greenback.
3. It’s GDP time: The recent weakness in stocks places extra importance on the Q1 GDP data, to be released today at 11:30am AEST. Analysts have marked down their forecasts as recent data has underwhelmed, and the latest Reuters survey of economists shows a consensus forecast of just 0.2% growth. Later tonight, former FBI director James Comey will testify before the US Senate as part of investigations into Russian interference in the US election.
4. Another day, another Bitcoin record: The cryptocurrency surged to new heights overnight, climbing above US$2,800 yesterday and then gaining another 6.7% to reach $2,871 a short time ago. Billionaire Mark Cuban is the latest to chime in on the Bitcoin craze, saying on Twitter that the market is in a bubble but he doesn’t know when or how far it will correct.
5. More demand for the good stuff: Iron ore traded mixed overnight, with higher grade 62% fines rising while lower quality 58% crashed by another 2.4% to $US37.96 a tonne. The outlook for 62% fines suggests a floor in the mid-$US50 range, with steel demand and the closure of less efficient blast furnaces in China expected to provide support for higher grade ore.
6. Bulls still winning on the S&P: Despite a tone of caution on global markets overnight, sentiment remains bullish towards US stocks as they continue to trade at record highs. The CBOE Equity Put/Call Ratio fell its lowest level since December this week, which means that traders are making a lower amount of bearish bets (puts) relative to a bet on stocks rising (calls). This post neatly summarises the driving forces keeping US stocks at elevated levels.
I’m Sam Jacobs and you can find me on Twitter @Mr_SamJacobs.