Originally published by Rivkin Securities
The Dow Jones Industrial Average continues to make record high closes although it was up only 15 points overnight. This is now the longest streak of record closes ever recorded and suggests that some profit taking is due. President Trump is due to give his first address to Congress on Tuesday evening (Wednesday morning AEDT) and markets appear to be waiting anxiously to hear what he has to say. Markets are hoping for substantial tax reductions and increased government spending, both of which Trump has promised. Political reality, however, may mean that these policies will be watered down before being passed.
The odds of a March rate hike in the US jumped to 50% this morning (from approximately 33%) after Kaplan from the Dallas Fed stated that a rate increase should happen sooner rather than later and that they should be concerned about falling behind the curve. This news caused a sharp sell-off in gold which fell $10 from an intraday high of $1,263 per ounce.
Durable goods orders data out of the US showed a decline in core durable goods orders of -0.2% although the previous month was revised up to 0.9%. This result was significantly below forecasts of a 0.5% increase. Durable goods represent orders by manufacturers for products that have an expected lifetime of at least three years and are one component of the health of an economy.
The local market is being far more cautious than the US markets with the S&P/ASX 200 continuing to drift lower in a gradual downtrend that started in mid-February. No large moves are expected today as the market awaits Trump’s congress address. Today, Australia’s current account data is due which is forecast to be substantially less negative than it has historically been. Although this quarter is still expected to show a deficit, large amounts of iron ore and coal exports at high prices have given us a strong trade balance and together with low interest payments on government debt analysts are expecting some of the only current account surpluses in Australia’s history in the coming quarters.
Data releases:
· Australian Current Account (Q4) 11:30am AEDT
· US Prelim GDP (QoQ Q4) 12:30am AEDT
· US Goods Trade Balance (MoM Jan) 12:30am AEDT
· US Chicago PMI 1:45am AEDT