To the scoreboard:
Dow: 25,803.19 +228.46 (+0.89%)
S&P 500: 2,786.24 +18.68 (+0.68%)
AUD/USD: 0.7917 +0.0025 (+0.32%)
ASX200 SPI futures (March 2018 contracts): 5,991 (-6)
1. Euro hits a three-year high: The latest move was driven by political developments, as German Chancellor Angela Merkel announced a ruling coalition deal with the Social Democrats. It capped off a big week for the euro which will start the week at just below $US1.22.
2. US bond yields on the move: US core inflation beat estimates on Friday night (1.8% vs 1.7% forecast), which helped to reinforce the market consensus of another Fed rate hike in March with at least two more this year. That saw shorter-term US 2-year bond yields climb above 2% for the first time since 2008, while benchmark 10-year yields also edged higher.
3. Despite the pick-up in US inflation and strong retail sales data to end the week, markets continued to sell the greenback with the US dollar index now at a four-month low. That broader weakness means the Aussie will start the week above US79 cents for the first time since late September, although it fell sharply against both the euro and UK pound on Friday night.
4. The week ahead: Local data will be headlined by Thursday’s monthly employment figures for December. There’s also November housing finance data on Wednesday along with Westpac’s monthly consumer sentiment survey. Globally, the UK and Europe will report monthly inflation data (Tuesday and Wednesday night respectively), and China has Q4 GDP figures along with retail sales data on Thursday.
5. Stocks still on a roll: Once again the prospect of higher bond yields didn’t phase US stocks investors as the Dow, S&P500 and NASDAQ all closed at new record highs to end the week. UK and European markets also climbed, and the ASX200 looks set to rise in the wake of a strong global lead, after trading flat on Friday.
6. Oil stays elevated: Energy stocks underpinned broader market gains on Friday as benchmark crude oil rose by 0.9% to stay within striking distance of $US70 a barrel — the highest level since December 2014. But iron ore dipped by more than 1% – its biggest fall for the year — and futures markets indicate more selling to come.
Have a great week.