A much better night for stocks should lead to a reversal of yesterday’s terrible close on the ASX 200. US stocks were up 0.9% or higher on the big indexes with the S&P 500 gaining 1.06%. That’s helped the ASX futures market rally hard as well with the December SPI 200 up 56 points.
That means that after the lowest close since 2013 yesterday at 4,909, after 6 days of unrelenting selling, the ASX should have an upday. Seven days in a row would be a new record so we are due a bounce.
Elsewhere, the rally in crude oil continued with prices off their highs but still 2.3% to the good. But the rally in stocks and the oil didn’t help the Australian dollar which was under pressure from the US dollar in the lead up to tonight’s FOMC decision that is widely expected to support the USD by raising rates. With the exception of the Canadian dollar buoyed by oil currencies were under pressure across the board.
Iron ore futures dipped a little, copper is back at $2.06 a pound, gold is $1,060 and bond rates are rising in pre-Fed trade.
So, the scoreboard (8.32am):
- Dow: 17,524, +156.41 (+0..9%)
- S&P 500: 2,043, +21.47 (+1.06%)
- SPI200 Futures: 4,960, +56 (1.1%)
- AUDUSD: 0.7195 -0.0047 (-0.65%)
1. Here comes the Santa Claus rip-your-face-off rally! It’s hard to know what the heck happened to traders on the ASX or in Japan yesterday. After a good morning things turned sour in afternoon trade. But that’s set to change this morning with strong rallies in the US overnight as Santa’s sleigh moves down Wall Street.
But traders had better buckle up according to Raymond James’ Jeffrey Saut who told CNBC, “I think the market has the potential here for a rip-your-face-off type rally.” BI US Akin Oyedele has his reasoning here. Now, what’s the number of my broker again? It’s been a while.
But even with the chance of a Santa Rally Macquarie Bank says their clients are freaking out at the moment. Paul Colgan has more here.
2. Glenn Stevens annual end of year interview. RBA Governor Glenn Stevens has given his wide-ranging end of year interview over at the AFR. He’s a man with plenty on his mind and amongst other things we know he’s not sure how the Chinese economic transition will play out.
But there is so much more he talked about. I’ve pulled out all the highlights for you here.
3. The Fed will raise rates tonight closing an interesting chapter in global markets history. By this time tomorrow the Fed is expected to have raised rates and markets will either be taking it in their stride or in a complete funk. It’s a big decision given everything that’s happening in the world but it seems the Fed has decided that the strength of the employment market and prospective growth are incompatible with zero interest rates.
Akin Oyedele from BI US has a great note on what the closing of this chapter in monetary policy history means.
4. Qantas. Who doesn’t want to talk about Qantas? They’re like our other national team. When they are doing well it feels like Australia is doing well. So even though the share price fell yesterday the profit upgrade is another step in the turnaround story which is gathering momentum.
But Chris Pash and David Scutt reckon that the Qantas turnaround is not just about the airline — it says a lot about the Australian economy as well.
5. Oil is surging. Oil prices fell to the lowest levels since the absolute GFC nadir in December 2008 just two nights ago. Since then prices have risen 7.5% and currently sits at $37.13. That’s off the highs from last night but a solid rally nonetheless.
What could be helping the market find a base and rally are changed thoughts about where crude’s real value lies. Goldman Sachs are on the record saying the price should fall to $20 next year but the analysts at Deutsche Bank reckon prices overshot to the downside. David Scutt has more here.
6. China bond market meltdown.Governor Stevens may not be too worried about a Chinese market meltdown but Linnette Lopez from BI US says analysts are having a scary discussion about whether China’s bond market “bubble” will see a “Lehman moment” in 2016. Part of China wanting a weaker Yuan I’m sure is tied to this but Chinese debt is a big grey swan for 2016.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day.
It’s a fascinating morning for technical traders. All sorts of markets look as though they may be rejecting lows at significant chart points.
BHP is a case in point. Assuming it closes higher today, it will be shaping up to reject a harmonic, AB=CD level. This gives it a decent chance of setting up for a rally.
Ric Spooner, chief market analyst, CMC Markets.