To the scoreboard:
Dow: 20,658 +2 (+0.01%)
S&P 500: 2,357 +2 (+0.07%)
ASX SPI200 Futures – June (20 minute delay): 5,890 -2
AUD/USD: 0.7504 +0.0003 +0.04%
Iron ore benchmark 62% fines: $US74.71 -$US0.74 (-0.98%)
1. Calmness still the order of the day: It was yet another day of low volatility overnight, as US stocks went nowhere. Traders are playing a waiting game early in the week pending an all-important earnings season that kicks off on Thursday with the big US banks. Energy stocks dragged the S&P 500 slightly higher after oil rose another 1% on geo-political concerns and more supply disruption in Libya. Those same concerns drove US treasuries slightly higher.
Interestingly, despite the relative calm on markets the CBOE Volatility Index (VIX) reached its second highest level this year. The VIX measures the market’s expectations of near-term volatility. This chart from investing.com shows the jump today:
2. Australia today: ASX 200 futures are barely changed, pointing to a quiet open for local stocks. The big miners and the AUD could face some pressure from the fact that iron ore has officially reached a bear market, losing another 1% to under $75. The AUD/USD trade is up slightly this morning after US Fed chair Janet Yellen said that the US economy is in good shape but GDP growth is still disappointing. On the data front, the ANZ Roy Morgan business confidence index comes out at 9:30am AEST, after falling to a one-year low last week. NAB’s business survey for March is released at 11:30am AEST.
3. When Larry Fink speaks, we listen: In his annual letter to shareholders, the CEO of asset manager Blackrock highlighted a correlation between consumer sentiment in the US and the performance of the S&P 500 over the last 10 years. Elena Holodny took a closer look, comparing the two back to 1990 and the correlation holds (although consumer sentiment has stayed roughly the same while the S&P 500 has risen). The figures provide an interesting addition to the debate between hard vs soft data. Here’s the chart:
4. Libor controversy rears its head: Scandal has engulfed the Bank of England in connection with the Libor rate rigging scandal. Libor is a set rate at which banks borrow money from each other. Reuters reported that the BBC has released a recording from 2008 between two bankers, with one of them saying that he was under pressure from the Bank of England to artificially manipulate the rate lower. In the initial 2012 investigation the Bank of England denied any involvement in the scandal. A member of the UK parliament’s treasury committee told BBC that he wanted the two bankers in the video to appear before the committee again to discuss the footage.
5. BHP fends off activist shareholder: BHP rejected calls from activist investor Elliot Advisors to change its company structure in Australia and the UK and sell assets to unlock value. Reuters reports that Elliot wrote a letter calling for BHP to set up a single headquarters in Australia, sell off its oil business and return cash to shareholders. BHP said in a statement that the costs of Elliot’s proposal significantly outweighed its potential benefits, and would put at risk the foundations that BHP has laid for stable long-term growth.
6. Investors brace for sell-off in European Corporate Bonds: This piece in the Wall Street Journal highlights the risks in the European Corporate Bond market, adding to growing negative sentiment about corporate bonds globally. Since June last year, the European Central Bank (ECB) has purchased 75 billion euros of corporate bonds from European companies. The ECB started lowering its monthly purchases of European debt from 80 billion euros to 60 billion euros in April. As a consequence of the reduction in its bond buying program, some analysts are concerned that the cost of corporate debt in Europe could increase significantly and stifle business investment.
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