The yield on the US 10-year note slipped 1 basis point to 3.72 per cent at 12.30pm in New York. The yield on the two-year bill was 4.54 per cent.
At 12.30pm in New York, the Dow was up more than 300 points to 34,179. The S&P 500 was trading at 4131.
While US equities are rallying, Morgan Stanley strategists led by Mike Wilson are wary.
“Client conversations have shifted from how much downside is left to when is that downside coming? Speculative bear market rallies can have that effect. They make one question their fundamental analysis and assume the market ‘knows something’ and this becomes a set-up for the next potential trap.
“With equity markets showing some real signs of exhaustion last week, we think the risk-reward is as poor as it’s been at any time during this bear market.”
Today’s agenda
Local: Westpac-MI February consumer confidence at 10.30am AEDT; NAB January business survey at 11.30am AEDT
Overseas data: Japan fourth-quarter GDP, December industrial production; Eurozone fourth quarter GDP at 9pm AEDT; UK December ILO unemployment rate; US January CPI at 12.30am AEDT on Wednesday
Other top stories
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Market highlights
ASX futures up 37 points or 0.5 per cent to 7387 near 4.30am AEDT
- AUD +0.7% to 69.67 US cents
- Bitcoin -2.4% to $US21,490 at 4.30am AEDT
- On Wall St at 12.30pm: Dow +0.9% S&P +1% Nasdaq +1.4%
- In New York: BHP +1% Rio +0.6% Atlassian +2.5%
- Tesla -1% Apple +2% Amazon +1.7% Microsoft +3.9%
- In Europe: Stoxx 50 % FTSE % CAC % DAX %
- Spot gold -0.7% to $US1852.80/oz at 12.28pm in New York
- Brent crude +0.1% to $US86.47 a barrel
- Iron ore -3.5% to $US120.40 a tonne
- 10-year yield: US 3.72% Australia 3.75% Germany 2.37%
- US prices as of 12.30pm in New York
United States
Americans anticipate income growth to slow and inflation to stay elevated in the Federal Reserve Bank of New York’s survey of consumer expectations, Bloomberg reported.
Median expected growth in household income declined 1.3 percentage point to 3.3 per cent in the January survey, the largest monthly drop in data going back almost 10 years, the New York Fed in a report. Views on inflation one year ahead were unchanged at 5 per cent.
Expectations for income growth remain higher than their pre-pandemic levels. Still, increasing budget strain is showing in the results, with the average perceived probability of missing a minimum debt payment over the next three months ticking up in January.
Bank of America’s view on earnings season :“345 S&P 500 companies representing 81 per cent of earnings have reported, with 4Q EPS still tracking a 1 per cent miss (vs. 4 per cent average beat historically) at $US53.43 (-1 per cent YoY).
“Weak guidance (twice as many instances of below- vs. above-consensus guidance YTD, weakest since COVID) has driven a 2023 cut of 3ppt, well below historical trend with just +1 per cent YoY growth /$US223 expected in 2023 (vs. +10 per cent YoY in June) where most of this is attributable to margin compression.
“But despite the well-documented risks to margins for 4Q, net margins (ex-Fins) are tracking a slim 20bp miss, and companies have addressed cost bloat aggressively this year (but likely need to do more.”
Commodities
RBC Capital view on Russia’s oil sector: ”It is our understanding that Russia may be starting to encounter difficultly maintaining output at technically challenging fields due the initial US and EU sanctions that prohibited the transfer of key technology and equipment to the Russian energy industry as well as the move by the Western majors to exit the country immediately after the invasion of Ukraine. In February and March 2022, respectively, the US and EU imposed sanctions on the export, reexport and transfer of oil and refining technologies to Russia.
“Certainly, export restrictions have proven to be painful for other Russian sectors. For example, the sanctions that banned the export of semiconductors have had a material impact on the Russian defense industry and according to senior US officials have “outperformed” their initial disruption goals.
“If the Russian oil industry is now facing similar challenges, we could be seeing the start of the sanctions-induced losses that the late OPEC Secretary General Mohammad Barkindo warned about at the RBC energy conference in June, noting that the severe impact of these and other financial sanctions on Russia will likely cripple the ability of Russia to be a future major exporter.”
