Traders see “goldilocks” conditions in US: Both European and US shares rallied overnight. For the latter, the term “goldilocks” has been bandied around. That is: growth in the US, though not as strong as it has been in the recent past, is still solid, while inflation risk is presently low, meaning the US Fed will likely remain in a neutral position. A reminder of this dynamic came in the second of two major inflation releases out of the US this week. PPI data showed a weaker than expected print, following the night prior’s soft CPI numbers. The effect has been static bond yields, a slight lift in the prospects of a US rate cut this year, and a US Dollar that has pulled-back from its highs.

US stocks fail to jump significant hurdle again: Perhaps most significantly for those with a bullish disposition, US equities have responded to the “goldilocks” dynamic in the most enthusiastic way. Once again, the S&P500 has challenged crucial resistance at 2815 – that notorious level at which the market has broken down on nearly four-or-five occasions in the past. Promisingly, as it applies to last night’s trade, the sector responsible for driving the S&P500’s gains is information technology – primarily Microsoft and Apple Inc. Recall, it was the en masse dumping of the tech-giants that led US stocks lower in Q4 last year. It’s hope that their continued recovery may be a bellwether, for the bulls, of further upside to come.

Green-shoots in commodities? It wasn’t only equites engendering a sense of hope for the global growth outlook in the last 24 hours. Arguably a more reliable indicator, global commodity prices registered noteworthy gains. The weaker US Dollar undoubtedly supported this, but it alone does not explain the broad-based strength across the commodities complex. Perhaps it’s just another part of the small snap back we’ve seen in markets since the de-escalation in trade-war tensions. An edging higher in the price of oil, after a contraction in US inventories last night, has been supportive too. Nevertheless, although a major break-out in commodity prices are yet to occur, the reversal in its downward trend has some suggesting these are green-shoots for the global economy.

Asian markets had a soggy day: To localize the focus, the ASX200, in line with the other major regional equity indices, closed well into the red during yesterday’s Asian session. It seemed it was one of those days where the market’s behaviour was a trifle inexplicable. The lead handed to Asian markets was solid enough, nor were there were any major tier-1 economic announces to undermine sentiment. Some indicated that it might have been comments from the night prior by US trade representative Robert Lighthizer that US tariffs on China remain a possibility. This answer isn’t satisfactory, however: the comments were made in the US session and caused little reaction then. Maybe yesterday’s weakness could be chalked-up to the market simply having a soggy day.

ASX200 to open higher this morning: Regardless, the tide looks likely to turn again this morning. SPI futures are indicating a 20-point jump at the open for the ASX200. What appetite there is for risk will be curious today. As mentioned, despite ample fodder a little upside yesterday, especially in growth and cyclical stocks, trade was defined by a languid rotation into defensive sectors. The phenomenon may well be attributed to the morning’s Westpac Consumer Sentiment reading. It showed a major fall in sentiment, resulting in a major tumble in Australian Commonwealth Government Bond yields. Though certainly a positive for yield-stocks, the fall in 10 Year ACGBs portends a meaningful slow down in domestic economic, and the likely necessity for RBA cuts as soon as August.

The monthly Chinese data-dump: Traders will get another opportunity to refine their views on global growth today: it's that time of the month when markets receive the big Chinese economic data dump. The bar was set last week during China's National People's Congress, as Chinese policymakers downgraded their growth targets, and announced a slew of fiscal and monetary measures aimed at supporting their economy. As it relates to Australian markets, two of today's prints stand-out as being most relevant: the industrial production, and retails sales numbers. They may prove significant for the AUD: as yields fall in AUD denominated assets, the yield disadvantage the AUD has against the USD grows, making the currency more vulnerable to data surprises and downside risk.

Brexit: Round to 2 of 3: The headline story today has been round 2 of 3 in this week’s Brexit-battle in the UK House of Commons. This morning’s vote was to decide whether to move ahead with a “no-deal” Brexit. By a narrow margin, the House voted against “no-deal”, setting up another vote tomorrow on whether to extend Article 50 and delay the March 29 deadline. There has been a lot of drama this morning, and the **** is certainly in the detail, especially as it pertains to Theresa May’s authority. But as far as financial markets go, the simple fact is this: the Pound has rallied, equally against the EUR as the USD, as traders bet on a delay, if not a reversal, of Brexit.

Written by Kyle Rodda - IG Australia