Stocks, bonds, and the US dollar all slipped lower into the close Friday after Hillary Clinton’s email scandal reared its head again.
That stocks recovered the worst of it is a good sign for traders. But if traders view this as more than a wrinkle in Clinton’s march toward the White House, excessive caution could weigh on markets over the next 10 days.
That could add to the woes of the local stock market which ended the week in poor shape Friday. SPI traders weren’t quite sure what to make of it though and left prices for the December contract down just 3 points.
On forex markets euro is back near 1.10, USDJPY is under 105 but the risk averse nature of the US dollar move is not helping the Aussie which is off 0.2% this morning at 0.7580.
Elsewhere, oil dipped on OPEC’s inability to even agree where production stands let alone make a deal. But gold was higher on the uncertainty. Likewise, both copper and iron ore are up.
Here’s the scoreboard (7.44am):
- Dow: 18161 -8 (-0.05%)
- S&P 500: 2127 -6 (-0.3%)
- SPI 200 Futures (December): 5,250 -3 (0.0%)
- AUDUSD: 0.7580 -0.0015 (-0.2%)
The top stories
1. The Clinton email controversy means political risk is back in markets. There are so many Clinton/FBI/email posts on the site I couldn’t possibly link all of them here. But traders will now need to factor in what this all means for markets. On the one hand, the polls say Clinton has the lead and Trump can’t catch her. It’s hard to tell from so far away and with the actual turnout to vote always uncertain.
Over the weekend Chris Jackson, a vice president at Ipsos and the guy who runs the Reuters/Ipsos poll, wrote an article saying its closer than it should be but Clinton will win. But here at Business Insider we have stories of two alternative methods – one an AI robot, and another a professor who correctly predicted 32 years of elections, both saying Trump will win.
Traders might take a little risk off the table this week. Already on Friday we saw the email news weigh on stocks, knock the US dollar lower, and bonds bid. Anything that threatens conventional wisdom is dangerous for markets because of the impact it has on traders. They often want to run for the exits at times like these.
And if you’re trying to understand where the rage feeding the Trump run comes from, these charts might help a little.
2. Where will the ASX find support? The ASX lost 3% in the last 3 days of trade to end Friday at 5283. That’s just above the last line of technical (Fibonacci) support traders are eyeing. If it breaks, a move all the way back to 5180 where the aborted run to 5500 started is on the cards, the chartists tell me.
3. OPEC still can’t get its act together, failing again over the weekend. Oil was off 2% on Friday night as OPEC struggles to come to terms with Iraq and Iran, both of whom don’t want to play ball with the production cuts. That’s important because OPEC’s inability to deal with itself means it’s impossible for a deal to be done with the non-OPEC nations.
Bloomberg reported this morning that non-OPEC nations ended talks with the group on Saturday without making any supply commitments. The oil ministers from Brazil, Azerbaijan, and Kazakhstan are all looking for OPEC to do a deal before they can talk. No doubt the Russians are waiting as well – they won’t cut production without OPEC cuts. So there remains a little downward pressure on prices for now.
4. The debate over Bank of England Governor Mark Carney’s future continues – but he might be staying. Mark Carney doesn’t seem like a quitter to me. Not with all he did at the Bank of Canada during the GFC and what he’s sought to do at the Bank of England recently. But as he told the House of Lords recently, he has his own personal issues to deal with so speculation has grown that his promise to make a decision on his future before year’s end would see him quit.
But the FT reports this morning that Carney “is ready to serve a full eight-year term, facing down Brexiter critics campaigning for him to resign ahead of time”.
“Mr Carney has told friends that he is likely to make a statement on his future this week to put an end to damaging speculation.”
This will be an important decision for the pound – so forex traders watch this space.
5. Failing a Trump presidency battering markets, US GDP data Friday suggests the Fed is moving closer to a December rate hike. US gross domestic product grew at an annualised rate of 2.9% in the third quarter, its fastest in two years, according to the advance estimate. The boost to growth came from a jump in exports — mostly of soybeans — and inventories. Business investment in equipment, however, contracted for a fourth straight quarter.
6. And here is my look at all the key data and events for the week ahead. Even before the Clinton email scandal re-emerged on Friday, it was always going to be a big week for markets across the globe. There are multiple central bank meetings, including the RBA, the raft of first week of the month data releases, and of course US non-farm payrolls to end the week. With thanks to the NAB’s market economics team, I have all you need to know about the week ahead here.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Woolworths – too far too soon
Woolworths’ sales results met market expectations on Friday, making further progress on closing the gap with Coles. The difference in their supermarket same store sales growth is now down to 1%.
However, CEO, Brad Banducci, promptly poured cold water on the share price, sounding pretty cautious about profit. He noted that December half profits could come under pressure from the price cuts needed to achieve stabilisation in sales.
This produced a pretty remarkable day’s trading. After opening 3.6% higher, the stock got slammed and finished down 2.3%. The result was the big bearish looking reversal candle on the chart below. Traders may have got a bit ahead of themselves on the recovery story.
The stock has already retraced 50% of the pre-sales reports gains of the last month. Nearby support now looks to be around $23.50 and the 61.8% retracement at $23.75.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC