To the scoreboard:
- Dow: 21,532.14 +123.07 (+0.57%)
- S&P 500: 2,442.253 +17.72 (+0.73%)
- AUD/USD: 0.7679 -0.0001 (-0.01%)
- ASX200 SPI futures (Sept contracts): 5,652 (+27)
- Iron ore benchmark 62% fines: $US64.25 (-2.06%)
1. Global stocks charge ahead: US stocks closed at a new record high after the market interpreted US Fed chair Janet Yellen’s comments to Congress as being more dovish in nature. While the expectation remains for the Fed to hike rates once more in 2017, Yellen said that policy makers will still keeping a close eye on inflation. Stocks in the UK and Europe finished more than 1% higher.
2. Canada hikes: The fallout from Yellen’s testimony extended to currency and bond markets, with the US dollar index trading near 2017 lows after the testimony. It was a mixed session for the greenback, which gained against the euro and yen but sunk against the loonie after the Bank of Canada went ahead and raised interest rates. Despite the rate hike being priced in at over 90%, a hawkish statement from the BoC drove the CAD 1.3% higher by the session close.
3. US oil demand stays strong: The Canadian dollar also got a boost from another rise in oil prices, as benchmark crude gained 0.5% after the US Energy Information Agency reported a weekly oil inventory reduction of 7.6 million barrels — the biggest weekly draw in four months.
4. Central Bank balancing act: US 10-year bonds fell by 5 basis point to 2.32%. The cautious tone adopted by Yellen overnight is representative of recently central bank strategy, said Mohamed El-Erianin the Financial Times. The chief economic advisor to Allianz wrote that central banks will be patient in the unwinding of market stimulus to try and prevent market shocks, but also said that the path to policy normalisation would be helped by pro-growth fiscal policies which have yet to materialise.
5. Brazilian conviction: Brazilian markets were buoyed on the news that former president Luiz Inacio Lula da Silva was convicted of corruption and will spend 10 years in prison pending an appeal. The Bovespa stock index rose by 1.6% and the Brazilian real strengthened by 1.4% against the USD. The ruling will likely ban Lula from contesting Brazil’s 2018 elections, which was seen as a positive for markets because the opprtunity for much needed economic and fiscal reform is now back on the table.
6. Who wants Bitcoin? With Bitcoin prices back under $US2,400 after almost reaching $US3,000, Morgan Stanley analysts say that the cryptocurrency is now being declined as a form of payment by more vendors. They outline why in an interesting research note, and it adds to the debate about whether Bitcoin functions as more of an investment vehicle rather than a liquid currency.
Bonus item: This is worth a look — over 60 slides of charts and graphics showing JP Morgan’s current outlook for the global economy.