6 things Australian traders will be talking about this morning

Getty/Spencer Platt

The Australia Day holiday spared local traders the rollercoaster ride experienced internationally over the past 36 hours after US stocks fell Monday and Chinese stocks crashed to a 13-month low yesterday.

But all is well again on stocks with the Dow up close to 300 points and the S&P 500 up 1.4% with 30 minutes of trade left. That sets up a good day for the ASX 200 which managed to reclaim the 5000 mark on Monday. March SPI 200 futures are up 1.1%, 54 points, to 4,953 suggesting a solid open.

That positivity is likely to be reinforced by the recovery in oil by 3% after Monday’s fall. Nymex crude is sitting this morning at $31.28 a barrel and copper has continued to push higher and is comfortably above $2 a pound and sitting at $2.03 toward the close.

That positivity in global markets has lifted the Australian dollar back above 70 cents after it fell to a low of 0.6919 yesterday.

Here’s the scoreboard (7.34am):

  • Dow: 16,167, +282 (+1.78%)
  • S&P 500: 1,904, +27 (+1.4%)
  • SPI200 Futures (March): 4,953, +54 (+1.1%)
  • AUDUSD: 0.7011, -0.0057 (+0.76)

And the top stories:

Australian markets missed the fall but should rally today.

1. The Brazilian president has intervened to put pressure on BHP over the Samarco dam bust. February 5 is the day Brazilian president Dilma Rousseff has set “as a target for some form of settlement” with the owners of the Samarco mine, the AFR reports this morning.

Rousseff is said to have personally intervened and held talks with the miners. BHP reiterated yesterday that it will support Samarco “in the recovery process” but that “at this stage we are not guarantors to Samarco”.

That’s what makes Rousseff’s intervention so important. The company also said “the form of our support will be worked out as part of any deal with the govenrment”.

2. The Fed meeting, what will they say? The Fed’s first two-day meeting for 2016 began last night and while the US economy is still a global standout, it’s the globe that everyone is worried about now. The FT reports this morning that:

The long-awaited rate increase went smoothly, but simmering concerns over China, the global economy as a whole, deflating commodities and financial market valuations have since risen to the fore. Even fund managers that were relaxed about slightly tighter monetary policy last month are now wondering whether that was complacent.

Traders everywhere are hanging on what the Fed will say at 6am AEDT tomorrow.

3. It’s CPI day in Australia, watch out for a low print. The consumer price index is out today and as usual it can be a big market mover for traders in forex markets and bonds. That’s because the level of prices, or price rises to be exact, is an important influencer of expectations of what the RBA may, or may not do. With all the market turmoil and the risk of a low print, traders will be on tenterhooks at 11.30am AEDT.

Here’s NAB bond strategist Skye Masters’ short preview:

“The median forecast is 0.3% for headline (1.6% YoY) and 0.5% for trimmed mean (2.1% YoY). NAB forecasting 0.1% for headline and 0.4% for trimmed mean.”

4. China is going to war over its currency. This is nuts. From the outside it looks like China might be losing the plot over its currency and the associated capital outflows.

Matt Turner from BI US has the latest:

China has officially issued a warning to George Soros: Beware of going to “war on the renminbi”.

That followed an earlier, less-specific warning to those hoping to short the yuan. Here are some of the funds hoping to benefit if the Chinese currency does fall further in value.

In related news, a top Chinese official was arrested just hours after talking about capital outflows.

5. Not even the darkest minds imagined it would be this bad for China. $1 trillion in capital left China in 2015. That’s worse than even the most bearish China analysts could have even imagined, reports Linette Lopez from BI US.

That might explain why China is starting to get very titchy, in a Bank of England circa 1991/2 kind of way. China’s reserves are massive. But everything is always relative and perhaps they don’t have so many reserves, relative to the size of the economy, as everyone thought. No wonder the hedge funds are betting on a weaker yuan.

6. GARTMAN: Crude oil will never trade back above $44 “in my lifetime” I remember making a call like this when I was trading Australian Bank bills and they went under 10% back in the early 1990s. It was after lunch and one of the senior traders accused me of being drunk. I said he had no idea, resigned, got asked to stay and have been right for the last 20 odd years.

But I’m still only 46 so there is plenty of time for me to be wrong. Likewise, noted US commentator Dennis Gartman’s call that crude won’t again trade above $44 is noteworthy as a BIG call. Myles Udland has more and the video here.

Udland also has a note from Citi that says that maybe oil is just about the US dollar’s move. If that’s the case, Gartman’s call might be in trouble at some point.

But Credit Suisse says oil still hasn’t hit bottom.

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

Webjet (WEB: ASX)

Tourism looks like being a bright spot in the upcoming profit reporting season

Online travel and hotel booking operator, Webjet has been a fantastic result for shareholders. The stock is up 63% from its low in September. In recent weeks, it’s lost momentum with the share price starting to chop through the 50 day moving average.

For those looking for supports as an entry point, the dashed line on the chart is beginning to look like the base of a consolidation pattern. The more conservative option would be the 38.2% Fibonacci retracement around $4.92.

Ric Spooner, chief market analyst, CMC Markets

You can follow Ric on Twitter @ricspooner_CMC

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