Good morning and happy Friday.
To the scoreboard:
Dow: 21,320.04 -158.13 (-0.74%)
S&P 500: 2,409.75 -22.79 (-0.94%)
AUD/USD: 0.7583 -0.0003 (-0.04%)
ASX200 SPI futures (Sept contracts): 5,676 (-23)
Iron ore benchmark 62% fines: $US61.96 (-2.1%)
1. Bond winds continue to blow: Global markets were jumpy overnight after minutes from the European Central Bank’s June meeting showed that committee members had discussed withdrawing monetary stimulus. Yields on German, French and Italian 10-year bonds all jumped by around 10 basis points. Combined with an optimistic outlook from the US Fed yesterday, US treasuries climbed to 2.37%. Aussie 10-years rose 5 basis points to 2.64%.
2. US dollar drops again: The ECB minutes helped push the euro back above $US1.14. The euro also gained 0.9% against the AUD, with lower commodity prices weighing on the Aussie dollar. The USD index fell back below 96 with a stronger euro and another round of poor data. ADP private payrolls were only 158,000 against a 185,000 forecast, and initial jobless claims rose for the third straight week. More positively, services PMI beat expectations with a reading of 54.9.
3. Stocks get hammered: A continued poor run of US data points and a jump in bond yields made it a rough night on global share markets. Yield-sensitive stocks such as utilities led falls in the US, with Bloomberg reporting the S&P500 fell below its 50-day moving average for the first time in 7 weeks. The Euro STOXX index was down 0.7%, and the ASX200 is pointing lower at the open with negative momentum likely to continue into Asian trade.
4. US payroll data: The next key move in global markets will likely be driven by key US employment figures later tonight, after the poor lead from ADP data. The forecast for US non-farm payrolls is for 170,000 jobs added in June, with annual wage growth of 2.6%. The unemployment rate is expected to remain steady at 4.3%.
5. Iron ore crashes: A move into the mid-$60 range has proved too much for iron ore, with benchmark 62% fines following steel prices lower. Iron ore prices have now lost almost 5% in July. Despite a rise in bond yields and a global share sell-off setting up a risk-off session, gold was little changed at $US1,224 an ounce.
6. While oil burns out: Oil rose sharply after a huge draw in US inventories, with the EIA’s weekly report showing a fall of 6.3 million barrels against a forecast of 2.3 million. The gains were short lived though, with benchmark crude falling from above US$49 a barrel to close at $US48.11 as concerns remain about the global supply picture.
Find me on Twitter @Mr_SamJacobs.