6 things Australian traders will be talking about this morning

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US stocks eased on Thursday to close the year down around 1% on the big 3 indexes. That sapped some of the ASX’s end of year strength with the futures down a little when they closed.

But as we open the new trading year, news of the face-off between Saudi Arabia and Iran over the beheading of a prominent Shia cleric over the weekend is the big news to kick off the year. Traders will watch the price action closely when futures trade opens in New York this morning.

Where the price moves and the impact on risk appetite in Asia will then drive stock prices on the ASX and around the region. So far though, forex traders are nonplussed with the Aussie dollar, one of the global bellwethers for risk appetite, down just 0.15% at 0.7285.

So, the scoreboard (8.24am):

  • Dow: 17,425.03, +178.84 (-1.02%%)
  • S&P 500: 2,043.94, -19.42 (-1.01%)
  • SPI200 Futures (March): 5261
  • AUDUSD: 0.7285 (-0.15%)

And now the top stories:

1. The ASX, global stocks and the January effect. Local traders on the ASX would have been happy with the Santa Claus rally which lifted the index from a mid-December low of 4,909 to end the year at 5,295. That’s a gain of almost 8% in the last two weeks of the year. But the index still finished down 2.1% on the year. Yet while Santa was kind to the ASX, he never really materialised the way that Wall Street traders had hoped. That left the S&P weaker in the last couple of days trade of 2015 and down 2% for the year. That’s the first time US stocks finished in the red since 2008.

You’ll recall that we reported last month a weak Santa rally usually means a weak start to the new year. So with Santa’s rally absent, traders are now looking to the January effect. Reuters reports that the Stock Traders Almanac reckons “the direction of January’s trading predicts the course for the year 75 percent of the time”. No rest for the wicked.

2. Woolworths is facing another tough year ahead. Woolies stock price hit its lowest level since 2006 last December and despite the year-end rally, it’s still in a strong downtrend with a loss of 20% in 2015. That sets up another tough year for Woolworths’ new chairman Gordon Cairns, his board, the yet to be appointed new CEO and shareholders.

3. Australian house prices might have peaked but the building boom has not. Brickworks managing director Lindsay Partridge has some solid news about economic growth and the building construction boom. For the first time in a decade, his company kept the kilns fired up over the Christmas break. He reckons demand is still strong and 2016 is going to be another solid year. I’ve got more on that here.

4. Crude oil, Iran and the Saudi Arabian beheadings. Nymex crude ended the year down more than 30% with a close of $37.05. The crash in the global benchmark, Brent crude, was even greater as the price collapsed below the US benchmark price. But the clouded outlook for crude has just become more confused after the beheading of Shia cleric Sheikh Nimr al-Nimr in Saudi Arabia over the weekend. The beheading, along with 46 other executions for terrorism offences, has enraged the Iranians who have said the Saudis will suffer “divine” retribution. The Saudi embassy in Tehran was also attacked and the Saudi foreign minister this morning said his country has broken off diplomatic relations with Iran and given their representatives 48 hours to leave the Riyadh.

On opposite sides of the Middle East’s current conflagration in Syria and ISIS, the beheading suggests that the year has barely begun and already we have the emergence of a black swan which could materially impact oil prices.

5. Stocks for the long run. Sentiment toward stocks in the US, UK and Australia certainly shifted in 2015. A down year after some easy gains will do that to traders and investors. But David Rosenberg, one of the globe’s best and most regarded market strategists, has a suggestion for those who might want to run to the safety of cash in 2016.

“Keep invested, don’t try to time the market,” Rosenberg wrote in the Wall Street Journal.

6. It’s a huge week of data. My Australian Diary will be back next Sunday but the first week of the year is a big one for markets. Friday’s non-farm payrolls in the US is as usual the big release for the week and the month. But there is also plenty of data here in Australia to keep traders interested. Today we get the performance of manufacturing index, Wednesday sees the release of the services index, Thursday is ANZ job ads, building approvals and trade. On Friday we get the performance of construction index, HIA new home sales and the retail sales figures for November.

Globally, beside US non-farms, we get a raft of Markit PMIs today, including the Caixin-Markit manufacturing PMI for China. Other highlights are the global services PMIs on Wednesday, German unemployment the same day and US trade Wednesday night.

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