To the scoreboard:
Dow: 20,976 -37 (-0.17%)
S&P 500: 2,397 -2 (-0.09%)
AUD/USD: 0.7351 +0.0009 (+0.12%)
ASX200 SPI futures (June contracts – 20 minute delay): 5,845 +19
Iron ore benchmark 62% fines: $US60.75 +$US0.60 (+0.99%)
1. Budget wrap – ScoMo pledges “better days ahead”: Treasurer Scott Morrison handed down the budget last night, with a big boost to infrastructure spending and measures to increase housing affordability. The government also hit the big banks with a a levy on liabilities that will raise $6.2 billion over 4 years.
Despite some arguably optimistic wage growth projections, the government is forecasting that the budget will return to surplus in 2021. Business Insider had full coverage of last night’s proceedings. Here’s a useful summary with links to further analysis for all of the key points.
2. Aussie remains under pressure: Yesterday’s poor retail sales report certainly didn’t help the Aussie battler as it struggles to hold ground with the odds seemingly stacked against it. US bond yields edged higher again with 10-year treasuries at just under 2.4% while 2-year notes are just off 2017 highs. Weaker commodity prices are also putting downward pressure on the currency. The AUD drifted lower in overnight trade but is still holding up quite well given the recent strength in the US dollar.
3. Global stocks play it cool: Markets are in drift mode this week without a major driver to shift momentum. US stocks fell slightly on weaker commodity prices, while the pan-European STOXX index was up 0.5%. The Shanghai Composite Index is feeling the heat from the recent crackdown on riskier lending, finishing just up yesterday after five straight falls where it lost 2%. That gives extra weight to today’s China inflation data at 11:30am AEST. ASX futures are up, perhaps in response to over-selling yesterday as the big banks got hammered once news of the pending back levy reached markets.
4. Commodities still weak: Iron ore spot prices climbed slightly overnight while steel rebar prices remained steady. Copper stayed below $2.50 per pound. Metal Bulletin reported that traders expect steel demand to hold up over the next few days, which could provide a floor for the iron ore price. The battle between US shale producers and OPEC rages on in the oil market, with prices wobbling again overnight amid increased doubt that OPEC will be able to balance the market. All eyes will be on tonight’s weekly inventory report by the US Energy Information Agency.
5. Bitcoin rockets higher: It’s been a while since we took a look at Bitcoin, following some struggles earlier this year. Turns out, the cryptocurrency has shaken that off and stormed to a new record high yesterday above $US1,700. There’s been no major driver for the rise as the market awaits the US Securities & Exchange Commission decision on setting up a Bitcoin Exchange Traded Fund (ETF):
6. Snapchat feels the heat: Short sellers have taken renewed interest in Snap Inc. ahead of its first quarterly earnings report. The stock price has managed to hold up well since listing two months ago, but over the last week traders have made $US100 million in bets that it will fall. Total short positions on the stock are now $US946 million. Analysts will be looking for growth in Snapchat’s daily active user growth, as competition from Instagram Stories threatens Snap’s market share.