6 things Australian traders will be talking about this morning

Photo by Matthew Lewis/Getty Images for NatWest

After looking better early the Dow and S&P 500 slid in the back half of the day’s trade as oil collapsed again even though inventories were down, not up.

That’s left the SPI 200 September futures pointing to a 19-point loss on the open of the ASX200 at 10am.

On forex markets the Aussie dollar had a run at 75 cents hitting a high of 0.7596 before it dipped back to be largely unchanged in what was a night of overall, but slight, US dollar weakness.

Elsewhere copper rallied hard, gold was a little better bid, and the bond rout eased as long ends rallied across the globe.

Here’s the scoreboard (7.37am):

  • Dow: 18034 –32 (-0.18%)
  • S&P 500: 2125 -1 (-0.1%)
  • SPI 200 Futures (September): 5,214 -19 (-0.4%)
  • AUDUSD: 0.7466 +0.0006 (+0.01%)

The top stories

1. It’s employment day in Australia and we might see a super strong number. Just like its US counterparts, the release of Australia’s jobs number each month is the most watched economic release on the calendar. Here in Australia we get the added spice of the volatility that the ABS’ sample, and rotation process, brings to the number when it is released.

Today’s August release is widely expected to come in around the break even level for Australian employment growth to hold unemployment steady at 15,000. But the NAB thinks it might be a bit stronger at 22,000 and they just might be right if Australian consumers understand the employment market they are in.

Let me explain. Yesterday in the release of the Westpac consumer sentiment survey we also got a read on consumer expectations about unemployment. Westpac reported that the Unemployment Expectations Index “fell from 141.2 in August to 138.4 in September (down 2%, recalling that a lower print means fewer respondents expect the unemployment rate to rise in the year ahead). The Index is now down 11.5% over the last year and 10.5% since September 2014.”

2. UBS: There’s ‘clear evidence’ that the stock market has topped out for now. Swiss investment banking giant UBS isn’t alone in its call that the top is in for now on US stocks. But the 8-10% fall they are expecting might be enough to frighten the heck out of a few investors. But the good news is the analysts at the bank think the correction into late October/November will be followed by a “classic year end bounce/rally”.

Akin Oyedele has more here.

3. The breakout in US bonds is a game changer. We’ve been banging on about bonds for a little while but that simply reflects the reality that lots of traders and investors have an eyebrow raised to what’s going on in the long end of the bond market and the increase in yields that we’ve seen across the developed world. You might say alert but not alarmed, but certainly folks are alert to the longer term implications of the changing shape of global bond curves.

Jonathan Garber has the UBS take on on things along with thoughts from RBA and Credit Suisse here.

4. Copper rallied 2.4% overnight after data showed China’s housing market is going nuts again. The commodity with a PhD has been hanging tough amid this week’s volatility. But last night it ignited higher and is back at $2.15 a pound for the first time in 3 weeks. Reports are that as copper works through inventories, traders’ eyes are also on this week’s run of better than forecast Chinese data – especially yesterday’s credit data.

Rachel Butt reports housing is going nuts again after credit growth roared back, with medium and long-term new loans to households in August, which are comprised of mostly mortgages, jumping 32.2% year-over-year.

That’s the fastest growth since 2010.

5. An ECB Governing Council member just said what all central bankers must be thinking. Don’t be “captive” to financial markets. That’s the message ECB governing council member Klaas Knot delivered in a speech overnight. It’s something Glenn Stevens said in his exit interview with the AFR, and it’s something that the Fed is likely to talk about as part of its deliberations at next week’s FOMC meeting.

“I think it’s very dangerous for central banks to become too much captive of financial market expectations,” Knot said in Vienna.

But he also added a comment which, to my read at least, suggests the ECB is not in a hurry to provide more accommodation. He said the ECB has made large QE commitments which “effectively means the degree of monetary accommodation coming from that program will be with us until the end [of] 2020”.

And importantly for bonds, and infrastructure, he said monetary policy can’t do it all.

6. Speaking of monetary policy not being able to do everything. Most people want to stay in gainful employment. They want to keep their jobs and politicians are no different. So the rise of populist voters, candidates and parties means that the cries of central bankers that fiscal policy needs to join with monetary policy are finally being heard.

Writing in the Wall Street Journal, Greg Ip says: “For years, the world has looked to central banks to deploy whatever tools they had to prop up economic growth. Now, just as those tools reach their limits, governments are quietly stepping up. Fiscal policy across the developed world is collectively turning more stimulative for the first time since the end of the recession.”

I’m with Ip 100%. And this shift has profound implications for global markets and the paradigm traders and investors have been working on in recent years.

We’ll know at 11.30am.

I’m Greg McKenna and you can catch me on Twitter or at AxiTrader where I am the Chief Market Strategist.

Key data for the past 24 hours (with thanks to BNZ markets)
NZ: Annual current a/c bal (%GDP), Q2: -2.9 vs.-2.6 exp
AU: Westpac consumer confid., Sep: 101.4 vs. 101.0 prev.
CH: New yuan loans CNYbn, Aug: 949 vs. 750 exp.
CH: Aggregate financing CNYbn, Aug: 1470 vs 900
UK: Unemployment rate (%), Jul: 4.9 vs. 4.9 exp.
EC: Industrial production (m/m%), Jul: -1.1 vs. -1.0 exp.

And now from CMC Markets’ Ric Spooner is today’s Stock of the Day

CYBG PLC (CYB: ASX)

NAB’s UK spin off, Clydesdale Bank, released details of an investor presentation yesterday and the stock fell 5%. The market appeared to take a jaundiced view of £200m in pre-tax restructuring costs including redundancies involved in closing around 50 of its 274 branches.
There are upsides though. Cost cutting is planned to be a key growth driver for CYB. It is aiming to reduce its cost to income ratio to 55-58% from current levels of 70% and has brought forward this target by a year to 2019.

CYB is assuming a tough, post Brexit environment for the UK economy. It’s planning for lower growth, a possible uptick in unemployment and a lower for longer interest rate environment. However, it’s being conservative and is arguably in a better position than many UK banks. As a purely domestic UK bank, Clydesdale has no issues with potential loss of European business or increased servicing costs as a result of Brexit.

The share price hit support and the 38.2% Fibonacci retracement level yesterday. However, downward momentum is strong with the last 2 trading days producing large, red candles. Deeper retracements like the 50% and 61.8% levels around $4.10/$4.25 might be on the horizon given current momentum.

Ric Spooner, chief market analyst, CMC Markets

You can follow Ric on Twitter @ricspooner_CMC

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