Stocks in the US were higher last night as US earnings season continues to provide positive surprises.
That’s lifted the December SPI 200 by another 13 points after yesterday’s rally with the breadth of the rally in US stocks likely to be felt in the local market at the open today.
Of course, the Chinese data at lunchtime will ultimately determine where the Aussie stock market and the Australian dollar is at the close of business. But for the moment the AUDUSD is bid at 0.7666.
Elsewhere, oil is higher, gold is higher too as inflation data around the globe starts to tick higher.
Here’s the scoreboard (8.12am):
- Dow: 18161 _76 (+0.42%)
- S&P 500: 2126 +13 (+0.62%)
- SPI 200 Futures (December): 5,404 +13 (+0.2%)
- AUDUSD: 0.7666 +0.0040 (+0.52%)
The top stories
1. Inflation is coming back. UK inflation is at a one-year high, US inflation is at near two-year highs and core CPI at 2.2%, Kiwi inflation is up more than expected, Chinese PPI is back in positive territory for the first time in years, and even moribund EU inflation is climbing off the mat.
It’s a scenario to warm the cockles of a central banker’s heart. The globe needs inflation to change the shape of the yield curve, to change the behaviours of consumers and business and to put the global economy back on a more positive and stable footing.
Certainly inflation is still very low but as RBA governor Lowe highlighted yesterday, actual prints influence inflation expectations which then feed into behaviours. And of course, humans feel changes, not levels. So if sustained, this uptick in inflation is great for the global economy and its growth outlook.
2. It’s China data dump day – here’s the key data and market expectations. Today is a huge day for the Aussie dollar and global markets as we await the release of China’s Q3 GDP data along with the latest updates of retail sales and industrial production. Traders will want to know if the trade data last week was just a hiccup or something which portends a more sinister slowdown in the economy. Via TradingEconomics, one of the best resources for economic data on the web, here’s a snapshot of the last print and what the market is expecting today for this epic data dump.
Naturally we’ll have coverage of the data as it drops a little after midday.
3. While I’m on China, Macquarie Securities says China doesn’t have a housing bubble. Bloomberg reports overnight that Larry Hu, head of China economics at Macquarie Securities, in Hong Kong, who describes the latest talk of a housing bubble in the world’s second-biggest economy as a recurring myth.
It’s all about supply and demand, he says. More here.
4. Rates are rising and big global investors are worried about a bond market crash. US 10-year Treasuries are down at 1.73% this morning, off the 5-month highs around 1.8% earlier this week and late last week.
But even though 1.72% or 1.8% isn’t that high in real terms and still below where US rates were earlier this year, the fact that the lows may be in and the trend changed is starting to worry big investors. Akin Oyedele reports there are fears of a bond-market crash, according to a survey of fund managers around the world conducted by Bank of America Merrill Lynch.
5. US earnings season might be the catalyst for stocks to melt up. Something to think about at a time when stocks in the US have been range-bound and expectations about the US economy still cautious. Most of the earnings we’ve seen so far in the US have been beats. And some, like Goldman Sachs, were big beats. Reuters data shows analysts have now upgraded expectations from this earnings season to growth from another quarter of weakness. It’s another sign much pessimism is baked into the cake already.
Equally the BAML report Akin covered above shows cash levels for big investors are now sitting at their highest levels since September 2001. At 5.8%, it’s not a huge percentage but it still tells you there is plenty of marginal cash on the sidelines that could get dragged into the market and propel stocks higher. Maybe.
6. Oil is up 1.6% after a big fall in inventories. Last night we heard from OPEC’s chief that the “building blocks” for a production deal are in place and that Saudi Arabia’s oil production slid off record highs last month.
That helped crude lift but it has really caught a bid after the big draw in inventories in the API data in the past hour. It’s up 1.6% to $50.71 a barrel. That’s important – and lets me finish where I began – because gas price rises were a big part of the US inflation data’s uptick overnight.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Westpac – What property downturn?
The consensus view has coalesced around the probability of a looming downturn in the apartment market and, most probably, the wider property market. If this is correct, there’s a risk of increased bad debts on property developer loans for the banks.
Interestingly, bank shares have been pretty resilient over recent months. This may partly reflect the fact that, this has already been factored into valuations with the big drop in share prices last year. From here investors appear to be adopting a cautious attitude. The banks already have fairly solid provisions for bad debt. Now it may be a case of waiting to get a handle on the extent of any problems. Management comments in the upcoming profit reporting season will be interesting.
You can follow Ric on Twitter @ricspooner_CMC