To the scoreboard:
Dow: 21,414.34 +94.30 (+0.44%)
S&P 500: 2,425.18 +15.43 (+0.64%)
AUD/USD: 0.7599 -0.0003 (-0.04%)
ASX200 SPI futures (Sept contracts): 5,661 (+10)
Iron ore benchmark 62% fines: $US62.80 (+1.36%)
1. US jobs report sends bond yields higher: The US economy added more jobs than forecast in June. While the US labour market continues to tighten, annual wage growth remains sluggish at just 2.5%. With no major change to the US Federal Reserve’s current policy outlook, US 10-year treasury yields edged higher to 2.38%. Australian government bond yields rose again in the wake of the Japan Central Bank’s renewed round of monetary stimulus, and are now up by more than 30 basis points sine June 27 at 2.78%.
2. And the greenback got a boost: The USD index climbed by 0.2% to 96 after the jobs data, posting gains against the pound and euro. The greenback hit a two-month high against the yen after the BOJ’s bond-purchase announcement. The Canadian dollar was the best performing G10 currency after Canada’s jobs report also beat expectations, with a July rate increase by the Bank of Canada now priced in at 100%. The Aussie dollar looks set to tread water to start this week.
3. Stocks outlook stays murky: With a small lead from the S&P500 after the US jobs report, ASX200 futures traders have marked the local index up slightly to start the week after some heavy selling on Friday. While moves in global bond markets are causing jitters for equity investors, Bank of America Merril Lynch have advised clients not to panic. The bank said that underlying strength in the US economy should help justify stock valuations as company profits grow.
4. How much oil is too much? Continued concerns about the global supply glut continued to weigh on oil prices, with both benchmark crude and US WTI crude prices falling by almost 3% on Friday. With WTI crude back below $US45, Reuters reported that prices above $50 would be required for the US shale oil industry to be sustainable. Iron ore bounced back at the end of last week to partly reverse Thursday’s losses, as the market for benchmark 62% fines remains choppy in the low-$US60 a tonne range.
5: Gold gets the blues: Gold continues to face pressure amid rising bond yields, and strength in the US dollar on Friday helped push gold to its lowest level since March. Perhaps gold demand is also being stifled by the rise of crypto-currencies — at least that’s the view of Tom Lee from Fundstrat Advisors, who said Bitcoin could reach $US20,000 per unit by 2022.
6: Bond bear market not here yet: As the bond market winds start to shift, some analysts are questioning whether the withdrawal of monetary stimulus by global central banks will usher in a bond bear market. But Gluskin Sheff economist David Rosenberg looked at recent history in suggesting that may be not be the case. Rosenberg noted that in each of the periods that the US Fed indicated it would wind back liquidity, stock markets decreased but bonds also rallied on safe haven demand.
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