It’s been an interesting night as far as the markets were concerned with higher US equities despite the fall in Chinese equities yesterday, but some softness in the US dollar and lower Treasury yields. US data prints were generally positive with still low weekly jobless claims indicating a strong labour market and a comforting durable goods orders report for January indicative of positive business sentiment. The Atlanta Fed’s GDPNow estimate for Q1 US GDP as of last night now stands at 2.5%, from 2.6% when the last estimate was made on 17 February, pointing to a growth rebound. There will be another update on that score after tonight’s personal income and spending report reveals the state of consumption in January.

US durable goods orders rose a stronger than expected 4.9% in January, and even excluding the volatile defence and aircraft category, core orders rebounded by 3.9%, countering December’s 3 .7% decline that came with an upward revision. US weekly jobless claims printed at 272K in week ended 20 February, almost bang on its forecast and the average claims level in the December quarter, a strong pointer to no fundamental deterioration overall US unemployment. Not that all sectors and regions are firing: the Kansas City Fed Manufacturing Index came in at -12 for February, the lowest level for this indicator since the GFC.

Oil is higher with Brent and WTI up 2-2½% on seemingly little fundamental news. US equity markets are mostly green into the last hour of the session, though Treasury yields have eased, 2s by three basis points and 10s by four with the Bloomberg spot US dollar index losing some traction.  It’s generally been a stronger night for the commodity currency set, with the Aussie dollar back north of 72 cents after yesterday’s Australian Capex outlook data took the wind out of the sails the currency with non-mining capital expenditure budgets still looking tepid for 2016-17. LME base metal prices overnight are lower by 0.9% overall, while the spot benchmark iron ore price in China gave back $1.89 of its recent rally taking prices back below $50 to $49.75/t.

There has been plenty of wire coverage of Fed Presidents John Williams and James Bullard both openly speaking about the various pluses and minuses facing the US economic outlook. Bullard, who until recently, has been quite strident and hawkish spoke about how he expects GDP growth to be better in 2016, that China adds a new complexity to the US economic forecast, and that the Fed is not on a “freight train” path of rate hikes. He wants to get away from predicting the number of rate rises.  Among other points, Williams was speaking about the unintended consequences of negative interest rates, a topic that is sure to get a lot of discussion in Shanghai over the next two days.

Coming Up

The two day Shanghai G20 Finance Ministers’/Central Bank Governors’ meeting starts today and will no doubt provide plenty of fuel for the newswires. Discussion of negative policy interest rates, the unknown dangers of pushing more aggressively on that front, talk of using fiscal policy to support growth will get plenty of discussion but you’d be bold to expect any meaningful change in domestic policy agendas.  No doubt there’ll be a renewed commitment to the Brisbane Action Plan to add 2% to growth.

As for today’s data, first up we have NZ’s January trade report at 8:45 AM, followed by Japan’s January CPI at 1030, and the January report for Chinese property prices at 1230, the latter two especially market sensitive. For tonight’s data set, the most sensitive come in the US session with the release of the January personal income and spending report, what it says about consumer spending in January and potentially economic growth for the first quarter as well as the all-important PCE deflators. The final February UoM consumer sentiment survey is also due (an update on inflationary expectations under focus) along with speeches from Fed Governors Powell and Brainard and the ECB’s Chief Economist Peter Praet.

Overnight

On global stock markets, the S&P 500 was +0.70%. Bond markets saw US 10-years -4.82bp to 1.70%. On commodity markets, Brent crude oil +2.21% to $35.06, gold-0.2% to $1,236, iron ore -3.7% to $49.75. AUD is at 0.7242 and the range was 0.7157 to 0.7243.

Good luck.

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• Markets Today: 26 February 2016 (PDF, 1MB)

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