To the scoreboard:
Dow: 20,592 -59 (-0.29%)
S&P 500: 2,345 -9 (-0.38%)
ASX SPI200 Futures – June (20 minute delay): 5,894 -31
AUD/USD: 0.7529 +0.0009 +0.12%
Iron ore benchmark 62% fines: $US68.04 -$US6.34 (-8.5%)
1. Markets drift lower as risk remains: US stocks fell and most global share indices are down as geo-political concerns continue to linger over markets this week. After Vladimir Putin slammed the US on Russian radio, US Secretary of State Rex Tillerson met with Russian Foreign Minister Sergei Lavrov, with Tillerson describing relations between the two countries as at “a low point”. The two leaders found some common ground, but still disagree on the role of Syrian leader Bashar Al-Assad in Syria’s government.
Gold rose another 1.1% to $US1,288.50 an ounce, while the ASX is unlikely to extend its winning streak coming into Easter, with futures down 31 points. US 10-year treasuries broke lower from their recent range of 2.3% to 2.6%, with stronger demand on the global risk outlook. This chart from investing.com shows the fall:
2. Trump says the US dollar’s rise is his fault: In keeping with his stance to support US manufacturers, Donald Trump stated overnight that the US dollar looks too strong. Trump also backed away from previous comments on China, saying that he won’t label China a currency manipulator. The US dollar index fell by 0.6% , while the Aussie dollar got a boost back above 75 cents on Trump’s comments. The Nikkei fell by 1% yesterday on the strength of the yen due to increased global risk, and USD/YEN fell further overnight below 109.
3. Data today: The Australian Bureau of Statistics has the March jobs report, and the Reserve Bank of Australia release its semi-annual financial stability review. Both reports will be issued at 11:30am AEST. The focus for traders will be on what kind of risks the RBA sees in the housing market. The RBA has also expressed concern about the labour market in its recent commentary, after a poor jobs report in February.
4. Iron ore in free fall: Benchmark 62% fines plunged by another 8.5% overnight and is now trading under $70 a tonne, down 28.3% from a February 21 high of $94.86. The daily drop was the biggest since March 2014. Prices still can’t find any support as traders sit on the sidelines in anticipation of further falls. Iron ore continues to track steel prices lower, with weak demand driving spot rebar prices down further. This chart shows the extent of the recent drop:
5. Rally in US infrastructure stocks stalls: In the wake of Donald Trump’s election promise to invest in a $US1 trillion infrastructure program, the S&P 500 Materials sector rose by 13%. A number of large US infrastructure stocks have given up post-election gains, with the harsh reality of political gridlock in Washington pushing back the time frame for Trump’s stimulus plans. US Steel has fallen by 23% since the end of February, shedding 8% in the overnight session on Wednesday.
6. Growth of corporate bond market in China hits a roadblock: Corporate bonds in China are supposed to provide a viable source of funding for Chinese companies. This piece from the Wall Street Journal shows that’s easier said than done. In order to steady the yuan and control financial risks, China’s central bank has raised short-term interest rates since January. That’s bumped up inter-bank lending rates and forced banks to sell bonds and raise liquidity, with the resulting sale pushing up bond yields and making bond issuance too expensive for some companies. The dilemma shows the difficult balancing act required as China’s economy matures.