To the scoreboard:
Dow: 22,048.70 -36.64 (-0.17%)
S&P 500: 2,474.02 -0.90 (-0.04%)
AUD/USD: 0.7889 -0.0001 (-0.01%)
ASX200 SPI futures (Sept contracts): 5,705 (+8)
Iron ore benchmark 62% fines: $US75.46 (unchanged)
1. RBNZ keeps rates on hold: The Royal Bank of New Zealand kept benchmark interests at 1.75% this morning as expected. The bank’s accompanying statement was relatively cautious — there were no key changes to the economic outlook and it maintained its forecast for rates to stay on hold until 2019. The kiwi dollar rose slightly on the news to just above US73.5 cents.
2. Safe-haven currencies find buyers: It was more of a risk-off environment in global currencies overnight, as markets kept an eye on rising tensions between the US and North Korea. Among traditional safe-haven currencies, the Swiss franc rose by more than 1% against the US dollar. The Japanese yen also found buyers, but that rally faded late and USD/YEN is back around 110 this morning. Geo-political concerns overnight put more pressure on the Aussie dollar, which hit a low of 0.7861 before rising later in the session. Here’s the move in the Swiss franc:
3. Stocks take a foot off the pedal: Concern around geo-political tensions also extended to global stocks. Markets in the UK and Europe fell by 0.6% and 0.7% respectively, while US stocks only dipped by 0.2%. The CBOE Vix volatility index climbed as high as 12.63 before closing at 11.11 – still well below its long-run average of 20 (reminder — bond investor Jeff Gundlach thinks it’s set to climb). The South Korean KOSPI index slumped by 1.1% yesterday due to developments with its northern neighbour, but South Korean stocks are still up by 17% for the year. ASX200 are hopeful of another good session locally as earnings season continues.
4. US stocks running out of puff? In addition to global risk factors, this post by Business Insider’s Joe Ciolli raises the point that perhaps US stock investors are running out of steam amid a bull market, which has seen US stocks climb to new record highs this year. Ciolli cites research from Bank of America Merril Lynch which shows that despite most US companies beating forecasts in the latest earnings season, US stocks didn’t rise on the good news. Here’s the chart:
5. Bond market stays calm: The risk-off sentiment didn’t extend to the bond market, but global bonds still saw some demand overnight, with the yield on benchmark US 10-year notes (which move inversely to their price) dipping by 2 basis points to 2.24%. Aussie 10-years are also little-changed at 2.65% and there were some capital flows in German bonds. The yield on German 10-years dipped as low as 0.418% before climbing back to 0.432% – still their lowest level since June.
6. Gold, is that you? Consistent with the risk-off theme in global markets, gold caught a bid and a short time ago was up by $21 to $1,283.56 an ounce. Benchmark crude oil climbed by 1.1% to $US52.80 on another big inventory draw in the US, where oil stockpiles decreased by 6.45 million barrels against 2.72 million forecast. Bitcoin fell back below $US3,250 overnight, but a short time ago had rallied back above $US3,300. There were no spot prices for iron ore last night due to a holiday in Singapore, but futures slid overnight.
Enjoy your Thursday, I’m on Twitter @Mr_SamJacobs.