Originally published by Rivkin Securities
The Dow Jones Industrial Average fell by slightly less than 300 points (1.2%) overnight as a speech from the new Fed Chairman Jerome Powell indicated that at least three rate hikes this year is a possibility. US bond yields also reacted with the 10-year climbing back to 2.9%. All of the FANG stocks (Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX) and Google (NASDAQ:GOOGL)) fell, with Google being hit the hardest. The next Federal Open Market Committee (FOMC) meeting will be on 21 March and current market pricing suggests an 87% probability of a 25-basis point rate hike.
Bitcoin (BitfinexUSD) prices continue their recovery bounce with the price now back above US$10,000 per coin. The current price of US$10,785 (according to Coindesk) represents an approximate 54% rally from the lows of early February. A research firm called Datatrek came out with a study that looked at the correlation of Bitcoin with equity prices and found that the correlations were highest when equity markets were declining. During rallies, the correlations became weaker.
The gold price was hammered on the prospect of higher rates, falling US$12.50 to $1,318. Gold has been holding in a range within the low $1,300’s over the last two months as higher inflation expectations and increased market volatility are likely supporting the price while the prospect of higher rates provides a cap on the price.
Oil prices also fell in a pull-back from the rally of the last two weeks. Climbing US production continues to weigh on the market as traders fear that the OPEC output cuts will be nullified by the rising US output. Oil inventories have fallen the past two weeks although expectations are for a build this week.
US durable goods orders data was released last night and came in substantially weaker than expected at -0.3% compared to expectations of an 0.4% increase. This data highlights the conflict in economic data at the moment with some data points showing signs of strength while others still indicate economic weakness. Today, Australia releases its private capital expenditure data for the final quarter of last year.
Data Releases:
- Australia Private Capital Expenditure 11:30am AEDT