6 things Australian traders will be talking about this morning

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It’s a week of talk this week.

Central bankers, OPEC and the US presidential debate dominate the landscape. So after the dip in stocks Friday was largely on the back of diminished expectations about an OPEC deal this week, we can see the impact words can have on markets – oil fell 4%.

That knocked stocks in the US lower and has our local market slated for a 24-point fall when the ASX 200 opens this morning.

The risk-off tone also saw bonds continue to rally and the Aussie dollar was a little lower as well. Gold is holding around $1337 and copper is still looking strong.

Here’s the scoreboard (7.31am):

  • Dow: 18261 -131 (-0.71%)
  • S&P 500: 2164 -12 (-0.57%)
  • SPI 200 Futures (December): 5,396 24 (-0.4%)
  • AUDUSD: 0.7614 -0.0028 (-0.36%)

The top stories

1. The ASX rally to 5431 Friday looks set to reverse a little today after the local market “caught up” to US stocks. The chart I have been sharing with you recently of the performance of the ASX200 versus the S&P 500 looks very different this morning after Friday’s 57-point rally to close the week at 5431.

In no small part, the majority of the underperformance of the local market has been made up with this rally. That means the futures indication of a 24-point sell-off at the open might be right. But the performance this week is going to be strongly driven by offshore events rather than catch up or under the market’s local steam as was the case last week.

ASX 200 versus S&P 500 (Source: Reuters Eikon)

But if the ASX can clear 5449 we might be in for a run toward 5600, the chartists tell me.

2. Bonds are not a safe haven. Just like the period after the ’87 crash till the Nasdaq bubble burst ushered in a more volatile time for stocks traders, where we have seen two massive falls in the past 16 years, so too it looks like there is a phase transition in the relationship between the moves in stocks and bonds happening.

That’s the view of Nikko Asset Managment’s global multi-asset team who say bond yields “are at such low levels that the risk-return profile is asymmetric” and therefore “bonds are not a safe haven” any more. I’ve got more here.

3. It seems like folks are kicking off on China risks again. Interesting how the newswires and my inbox have been assailed by China bad news over the past couple of days. The NAB popped a research note in saying China’s debt problem is bigger than they report – but don’t worry to much.

Likewise, Jim Edwards reports that Fitch has said something similar. China may have $US2 trillion in hidden bad debt — 10 times more than official numbers, Jim reports. Ambrose Evans-Pritchard picked up the same story while Ben Moshinsky says even the Bank of England is sounding the alarm on Chinese debt.

Something to watch.

4. Spotify is causing major problems for the globe’s economic policy. This is a cracking post from Jim Edwards. He discusses some great research from HSBC’s James Pomeroy which suggests that the construct which is GDP is essentially no longer fit for purpose.

Here’s an excerpt:

What if it’s all Spotify’s fault?

Or rather, not Spotify specifically, but tech companies and the services they provide. Our economy is less and less dependent on factories churning out physical objects, and more and more dependent on non-tangible, virtual goods and services.

I also wrote a piece on Pomeroy’s research earlier this month saying the habits of digital natives might be leading central bank policy makers up the wrong path.

5. Here’s everything you need to know about OPEC’s big meeting this week. Aargh, OPEC is channeling it’s inner Fed again it seems, as oil collapsed Friday with hopes fading that the talk of the past few weeks that a deal is close has been another mirage. It’s got so bad that Russian oil minister Novak reportedly said on Sunday that a deal is “non-critical”.

Could we get a surprise this week? Of course. But in the lead-up, Elena Holodny has a great primer with everything you need to know before the meeting. Oh, and if you are wondering why this is important, just recall, if OPEC gets its act together and can drive oil above $50 and a little higher, the world gets a global inflationary pulse. That’s important.

6. Not a lot of data this week but there are still plenty of market moving events. This week we hear from Fed chair Janet Yellen a couple of times, there are all up about a dozen Fed speakers, Mario Draghi is facing lawmakers in Europe, BoJ governor Kuroda is speaking and of course, we have the monumental US presidential debate.

So it’s potentially a bigger week than the last week of the month usually has a right to be. With thanks to the NAB’s market economics team, here’s my diary of the week ahead with all the key events.

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)
GE: Markit manufacturing PMI, Sep P: 54.3 vs. 53.1 exp.
GE: Markit services PMI, Sep P: 50.6 vs. 52.1 exp.
EZ: Markit manufacturing PMI, Sep P: 52.6 vs. 51.5 exp.
EZ: Markit services PMI, Sep P: 52.1 vs. 52.8 exp.
CA: CPI (y/y%), Aug: 1.1 vs. 1.4 exp.
CA: Core CPI (y/y%), Aug: 1.8 vs. 2.0 exp.
US: Markit manufacturing PMI, Sep P: 51.4 vs. 52.0 exp.