To the scoreboard:
Dow: 22,085.34 -33.08 (-0.15%)
S&P 500: 2,474.92 -5.99 (-0.24%)
AUD/USD: 0.7910 -0.0003 (-0.04%)
ASX200 SPI futures (Sept contracts): 5,682 (+4)
Iron ore benchmark 62% fines: $US75.46 (-0.93%)
1. Has the dollar turned?: The US dollar gained more ground against the pound (down 0.3% to $US1.2990) and euro (down 0.4% to $US1.1750) overnight, with the recent turnaround in data flow continuing as new job openings for July beat expectations. Despite signs that the USD is finally strengthening and poor trade data out of China, the Aussie dollar is still holding above US79 cents this morning aided by yesterday’s very strong NAB business survey results.
2. Stocks drop from record highs: The Dow finally had a down day while the S&P500 and tech-focused NASDAQ also slipped. US stocks opened higher but fell by the close on geo-political jitters, after Donald Trump’s “fire and fury” statement on the possible nuclear threat posed by North Korea. ASX futures traders are staying brave amid the casual threats of nuclear war, marking the local index up after a selloff yesterday. The ASX200 briefly moved towards 5,800 — and break higher from its recent technical range — before the sellers took control and dragged the index back to a close of 5,743.
3. And speaking of stocks: This post by Joe Ciolli suggests that trouble could be lurking on the S&P500. Ciolli explains that the index is weighted by market capitalisation, so the biggest companies have more influence on the direction of the market. If you give the whole index an equal weighting, the S&P500’s performance this year drops by 2% — and that difference is expanding as the world’s biggest companies like Amazon and Apple continue to dominate. Here’s the chart:
4. The day ahead: Key data today will be led by the release of housing finance numbers for June from the ABS, which are likely to show a continued shift away from investor lending towards owner-occupier loans following APRA’s lending restrictions introduced in April. Also this morning at 10:30am AEST there’s the Westpac/Melbourne Institute consumer sentiment index and Chinese inflation data.
5. Could bonds sell-off? Global bond yields (which move inversely to their price) were little-changed overnight, with benchmark US 10-year notes edging higher to 2.26%. While the bond market is quiet for now, “bond king” Jeff Gundlach has weighed in with a view that more volatility is around the corner. Gundlach is eyeing a threshold of 2.42% for the 10-year, and has also made a significant bet on an increase in stock market volatility in the second half of this year.
6. Commodities wrap: Iron ore prices took a breather from their recent rally yesterday evening, but the overnight action in futures markets suggest that the fall will be short-lived. Benchmark crude oil dipped by 0.5% to $US52.10 a barrel ahead of tonight’s weekly inventory report from the US Energy Information Administration. Gold has yet to make a major move from its recent trading range, but ticked above $US1,260 an ounce this morning in a slightly more risk-off environment following President Trump’s comments on North Korea.
Enjoy your Wednesday, I’m on Twitter @Mr_SamJacobs.