To the scoreboard:
Dow: 22,057.37 +259.58 (+1.19%)
S&P 500: 2,488.11 +26.68 (+1.08%)
AUD/USD: 0.8033 +0.0006 (+0.07%)
ASX200 SPI futures (Sept contracts): 5,736 (+31)
Iron ore benchmark 62% fines: $US74.49/t (0.2%)
1. Markets shake off the Monday blues: The S&P500 kicked off the week with a bang, rising by more than 1% for the first time since August 12 on high trading volumes, to close just off its record high. Major European indexes also finished more than 1% up as tensions with North Korea eased and the impact of Hurricane Irma was less than feared, while the MSCI world stock index is trading at a new all-time high.
2. US dollar reverses trend, for now: The weekend developments saw safe-haven capital flows unwind and the US dollar climbed by more than 1% against the yen and Swiss franc. As part of a broader USD recovery overnight, the euro is back below $US1.20 and the pound is off its recent highs. Commodity bloc currencies were mixed, with the Aussie and Kiwi both falling while the Canadian loonie gained more ground against the greenback.
3. Bonds ease back: As global markets breathed a sigh of relief, the yield on benchmark US 10-year treasuries rose to 2.13%, up 7 basis points although still near 10-month lows. Just overnight, the CME’s Fedwatch tool increased the probability of a December rate hike in the US from 27% to 41%. The move in yields supported US financials and may give Aussie bank stocks another boost in today’s session.
4. Here’s why US stocks won’t fall off a cliff: Although markets have been digesting some bad news lately, the S&P500 has remained relatively shock-proof and Goldman Sachs say there’s two reasons for that. The bank’s analysts cited low investor euphoria and the continued expansion of the US economy as factors that will prevent a sharp stock correction. More here.
5. Data today: Domestically this morning there’s the ANZ-Roy Morgan weekly consumer confidence survey, which has been sliding in recent months. Then at 10:30am AEST there’s NAB’s widely-read monthly business confidence index for August, which is coming off a record-high in July. Later tonight the UK has retail sales and August inflation data, ahead of the Bank of England’s interest rate announcement on Friday.
6. Keep your eye on central banks: Specifically, asset tapering. While slow inflation growth in the US has raised doubts around the pace of interest rate hikes, this interesting piece of research from JP Morgan reasserts that the US Fed’s current plans to reduce the size of its balance sheet will be worth monitoring. At its current size, the impact on markets is minimal but the analysis suggests that when tapering commences it will have a material effect on asset prices.
Enjoy your day, I’m on Twitter @Mr_SamJacobs.