The surprising resilience in markets following US missile strikes in Syria is poised to continue into the start of trade Monday morning, even as the continued sharp retreat in the iron ore price weighs on the Australian dollar.
ASX futures are up 14 points, pointing to a 0.2 per cent early advance in a shortened four-day trading week ahead of the Easter break.
The Aussie dropped below US75¢ on Saturday morning after the spot price of iron ore shed 6.8 per cent to $US75.45 a tonne, taking its swoon to 20.5 per cent from February 21, a steep enough fall for it to be now in official bear market territory.
The slide in iron ore, long mooted by a range of industry executives and brokerage analysts, reflected a sharp drop in both Chinese iron ore and steel futures. Despite Friday night's plunge, the US-listed shares of both BHP Billiton and Rio Tinto held relatively firm over the weekend, edging down 0.5 per cent and 0.9 per cent, respectively.
Perhaps the strength of oil, gold, aluminium and nickel helped. Oil touched its highest in a month after the US missile strike on a Syrian air base and on positive speculation OPEC members will agree next month on extending their quota cuts beyond the initial six-month period in a bid to further dent the global glut.
Deciphering what else is happening in the world is a little less clear cut.
At the tail end of last week were the US missile strike on Syria, the first meeting between Donald Trump and Xi Jinping, a terror attack in Stockholm, the mixed US March jobs report seen reflecting mild weather more than weakness, and the Fed's one-step/two-step dance on the pace of future interest rate hikes.
"While the US missile strike against Syria in response to a chemical attack on its civilians caused a bit of uncertainty in financial markets, it looks to have been trivial and short lived," AMP Capital head of investment strategy Shane Oliver said.
"One thing it does tell us though is that the US is not withdrawing into isolationism under Trump as some feared and that is a good thing."
Over the weekend, New York Fed boss William Dudley reset his balance sheet/rate comments to make it clear that any "pause" in lifting rates by a decision to begin paring the central bank's balance sheet would be minimal. Capital Economics continues to bet on four rate rises in 2017.
In addition, investors are awaiting results from the March quarter with US banks among the first off the rank this week, led by Citigroup, JPMorgan Chase & Co, and Wells Fargo & Co. Bank and energy companies are expected to pace a double-digit earnings advance.
Most major equities markets continue to hover near multi-year highs and investors, while somewhat cautious, are still content with valuations – notwithstanding the Fed's concern as cited in last week's March meeting minutes.
"Global equities have just had their best quarter in nearly four years," strategists at HSBC wrote in a note. "Valuations are full. Markets need a pause for breath and some near-term earnings validation."