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Morning markets: US stocks hit fresh record, Treasuries tumble

Wednesday, 13 Jul 2016 06:36:51 | Stephen Letts And Sue Lannin

Traders were applauding a fresh record high for US markets. (Reuters)

US stocks reached fresh record highs, while safe-haven assets such as US Government Treasuries and gold were heavily sold off.

Markets at 8:00am (AEST):

  • ASX SPI 200 futures +0.7pc at 5,343
  • AUD: 76.2 US cents, 68.85 euro cents, 57.5 British pence, $NZ1.044
  • US: Dow Jones +0.7pc at 18,348, S&P500 +0.7pc at 2,152, NASDAQ +0.7pc 5,022
  • Europe: FTSE flat at 6,681, DAX +1.3pc at 9,964 Eurostoxx50 +1.7pc at 2,933
  • Commodities: Brent oil +4.2pc at $US48.20/barrel, Gold -1.5pc at $US1,354/ounce, Iron ore +5.6pc at $US58.80/tonne

The stock market rally over recent days has seen global shares recoup all the losses they made after the UK's decision to leave the European Union.

The MSCI world share index has gained 7.9 per cent from its trough in the wake of the Brexit vote.

Wall Street's S&P 500 reached a record high for the second day in a row, with the Dow Jones Industrial Average joining in the party with its first record high in 13 months overnight.

Aluminium giant Alcoa gained after its second quarter profit was better than expected.

However, the picture looks decidedly grimmer, and out of kilter with the stock rally, when analyst forecasts for the whole US market are reviewed.

The consensus is that companies in the S&P 500 index will post their fifth straight quarter of shrinking earnings - hardly the stuff that should trigger record high share prices.

NAB currency strategist Rodrigo Catril succinctly explains the core reason for this disconnect.

Risk assets had another positive night boosted by the prospects of a new round of stimulus in some major economies and the removal of at least one source of UK political uncertainty.

A Ben Bernanke visit to Japan has sparked talk of helicopter money to inject life into that nation's moribund economy.

The second part of Mr Catril's equation actually put a dampener on London's share market, as a rising pound saw investors sell UK stocks.

Investors were also flogging off US Treasuries, with prices falling and yields rising after two bond auctions this week witnessed the lowest demand in seven years, after 10 and 30-year bond yields had last week fallen to their lowest level on record.

Commodities prices rose as well on hopes of more economic stimulus.

West Texas crude oil jumped 5 per cent on a weaker greenback and supply disruptions in Nigeria.

Iron ore matched those gains, with a 5.6 per cent surge to $US58.80 in Tianjin, China.

Chinese trade data will be the most closely watched event globally.

Another substantial surplus of around $US50b is forecast although the composition is again expected to be weak, with imports and exports tipped to be down 6 and 5 per cent respectively, pointing to softness in both the domestic and external economies.

Today's agenda:

  • Australia: Westpac consumer confidence - July (10:30am)
  • China: Balance of trade - June (1:00pm)
  • Canada: Bank of Canada rates decision (midnight)

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