Standing down
Trump’s address to the nation this morning following a string of Iran missile attacks that resulted in no casualties, has pretty much confirmed what was well telegraphed in the back half of yesterday; that the US are not looking for war and will exercise a more prudent approach when it comes to a US response.
Trump asserted that “as long as [he] is president… Iran will never be allowed to have a nuclear weapon”. While the ball is now firmly in the US court, the situation still appears fragile with some undecided about whether tensions are yet to peak. My bias is that markets will continue to fade much of the news though will remain highly reactive should the conflict take a step in the wrong direction.
Markets recoup losses and then some
The V-shaped rebound off yesterday’s lows saw risk-off flows pull away from the likes of Crude and Gold. Gold appears heavy at US$1,556 having peaked above US$1,600, while Crude has now dipped below pre-attack levels as traders extinguish the potential of oil supply disruptions.
The mood across equities is also upbeat with S&P 500 back searching for all-time highs. Nasdaq climbed 1% helped by the likes of Tesla (TSLA); its market cap at ~89bn exceeding the combined likes of General Motors and Ford.
In Aus, the ASX 200 looks set for a moderate bid at the open with futures suggesting a 46pt rally. Oil and Gold stocks, sensitive from geopolitical tensions and the run-up in commodity prices, are likely to see some retracement over the day. Alacer Gold (AQG), Dacian Gold (DCN) and Santos (STO) come to mind.
Scheduled risk but look for sedate reaction
A few data points lie ahead in the calendar. Aussie trade balance is due out at 11.30am AEDT, while China CPI numbers fall after midday at 12.30pm AEDT. These might get a look in for economic significance down the track but are unlikely to start any major moves today given the US-Iran overhang. One point of interest, however, will be whether Australia’s trade surplus continues to decline having peaked in June last year at ~A$7.9bn.
AUD sustains under the 200d-MA at 0.6866 but could see a slight lift through the day with AUS 10y yields +4bps higher in late NY, and broad risk sentiment better overnight. Though, February market pricing for an RBA rate cut remains strong at over 50% likelihood and likely weighs on the commodity currency.
ADP employment bodes well for NFPs
ADP National Employment figures have registered a decent beat coming in at 202k vs 160k consensus forecasts. This number, a precursor of sorts though still loose at times, keeps traders upbeat as we approach NFPs – the key data point for the week. The US growth story maintains strength and supports the US Dollar Index for now.
