To the scoreboard:
Dow: 23,860.46 -1032.89 (-4.15%)
S&P 500: 2,580.88 -100.78 (-3.76%)
AUD/USD: 0.7783 -0.0040 (-0.51%)
ASX200 SPI futures (March contracts): 5,708 (-104)
1. US stocks collapsed into the close and erased their gains for the year overnight, and ASX futures are sharply lower as market jitters saw a flight to safety overnight. Benchmark US 10-year bond yields remain elevated near four-year highs while in currencies, money flowed back into the safe-haven Japanese yen.
2. The rise in volatility — and the impact on markets as low-volatility based trades — has been a key talking point this week. The CEO of London-based hedge fund 36 South told Business Insider that markets are just at the start of a volatility cycle, but Goldman Sachs says the volatility spike that rocked markets on Monday night won’t happen again anytime soon.
3. The Aussie dollar is back under US78 cents this morning amid the overnight rise in risk-off sentiment. It follows a speech last night by RBA Governor Philip Lowe who highlighted that Australia’s floating exchange rate gives the central bank flexibility when it chooses to raise rates. Aside from demand for the yen, the UK pound also gained ground after a hawkish interest rate hold from the Bank of England. Here’s the move in the Aussie:
4. The day ahead: Traders will be watching for changes in the RBA’s economic outlook when the bank releases its quarterly Statement on Monetary Policy (SoMP) at 11:30am AEDT. On the local front there’s also December housing finance data from the ABS (11:30am AEDT), while key data regionally will be led by January inflation figures (CPI & PPI) out of China.
5. Iron ore prices continue to push higher and futures markets suggest there’s more gains to come, while oil fell to its lowest point of the year beneath $US65 a barrel. While the prospect of rising inflation has been one of the catalysts for stock selling this week, Citi analysts think base metals such as copper and zinc are best-placed to gain from a high-inflation backdrop.
6. Amid the latest market jitters, Bitcoin prices are holding steady above $US8,000 this morning after dipping below $US6,000 earlier this week. But the latest research from Morgan Stanley said the world’s biggest cryptocurrency may become a victim of its own success.
Bonus item: The chief strategist at a $US695 billion money manager has told Business Insider that markets are at a “watershed moment”, as a gap still remains between the number of times the US Fed plans to raise rates this year compared to the market’s expectations — and it may drive further volatility.