To the scoreboard:
Dow: 21,012 +5 (+0.03%)
S&P 500: 2,399 +.0.09 (+0.00%)
AUD/USD: 0.7383 -0.0004 (-0.05%)
ASX200 SPI futures (June contracts – 20 minute delay): 5,867 +5
Iron ore benchmark 62% fines: $US60.15 -$US1.58 (-2.56%)
1. US bond yields are rising again: Yields on US treasuries have risen steadily since the start of May, as a run of strong data releases has led to the likelihood of a June rate hike being almost fully priced in. US 10-years have risen by 11 basis points to 2.39% since April 30, with shorter 2-year notes rising from 1.26% to 1.33% in that time. The Chicago Mercantile Exchange Fedwatch monitor has the currently probability of a rate increase on 14 June at 87.7%.
2. Le quiet: The market reaction to Macron winning through on the April 25 election was significant, but his victory in the run-off was fully priced in and the French CAC-40 stock index actually fell 0.9% overnight. US stocks were little changed, while Japan’s Nikkei jumped 2.3% yesterday after being closed for three days, benefiting from a weaker yen last week. While ASX SPI traders have priced the local market 5 points up, it could face headwinds as pressure remains on commodity prices and there’s talk that tonight’s budget may target the big banks.
3. VIX hits another record low: Given the relative calm on global markets, it’s probably time to check on the VIX index. Regarded as a measure of market volatility, the gauge hit its lowest level since 1993 overnight and is now at a reading of 9.77. Of course, that makes sense if volatility has been low because the VIX is only a reactionary measure of what’s happening. One would think the “50 Cent” trader (who’s now been unmasked) will be hoping for some volatility to hit markets again soon:
4. Data today: The ABS has retail sales at 11:30am AEST. After a poor reading last month, the retail figures carry extra weight given the risks to consumption-based growth drivers due to Australia’s slow wage growth. And of course, it’s budget day. The Federal Government hands down its 2017 budget at 7:30pm AEST, and Business Insider will have full coverage throughout the evening.
5. Aussie is struggling: After holding above US74c overnight, the AUD faced more selling late in the session and closed down 0.42% at US73.8 cents. Rising US bond yields and softer commodity prices should continue to pressure the Aussie, although it’s held up quite well so far. The Euro couldn’t hold above US$1.10, falling 0.66% to $US1.092 while a stronger US dollar broke through 113 Japanese yen.
6. Oil gets a bump, pressure remains on iron ore: Oil found some buyers overnight although benchmark crude remains under $50 a barrel, as OPEC countries talked up extending the current 1.8 million barrel per day supply cuts beyond this year. Iron ore spot prices dropped again and futures continue to fall, after Chinese trade data disappointed and concerns remain about inventory build-up at Chinese ports and slowing growth from Chinese authorities’ credit-crackdown: