6 things Australian traders will be talking about this morning

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Stocks in the US were up overnight as they held onto the gains we saw in futures trade in our time zone yesterday.

That positivity was largely because of the perceived Clinton debate victory, most say. But it could equally have been the stellar consumer confidence numbers which hit a post GFC high in September or the fact Fed vice chair Stanley Fischer said even though he wants to raise rates, it wouldn’t be too far.

But even with that positive lead, futures traders on the ASX are expecting the local market to open on a downer with the December SPI 200 contract down 6 points.

Gold and oil are down as well while the Australian dollar is looking strong at 0.7663 against the greenback, even though it was once again rebuffed from the 77 cents level overnight.

Here’s the scoreboard (7.57am):

  • Dow: 18228 +133 (+0.74%%)
  • S&P 500: 2160 +13 (+0.64%)
  • SPI 200 Futures (December): 5,401 -6 (-0.1%)
  • AUDUSD: 0.7666 +0.0029 (+0.37%)

The top stories

1. Markets think that Trump lost the election debate – but maybe he didn’t. Generals always fight the last war, they say. So I don’t want to fall into the trap that says the market getting Brexit wrong means they’ll also underestimate Donald Trump’s real chance of becoming the next President of the United States. But it’s a non-trivial possibility.

So while stocks rallied in the US overnight, and were on futures trade in our timezone yesterday, and while the Mexican peso gained more than 2% against the US dollar, it’s worth noting that when Peter Farquhar did a quick poll of polls yesterday, Trump’s assertions that he’d won the debate weren’t so far-fetched.

Just something to keep in mind to guard against groupthink, which is poison for traders.

2. UBS says Sydney property is in the bubble zone. It’s not like we didn’t all know intuitively already, but global investment bank UBS has Sydney at number 4 on the global list of Bubblicious housing markets.

Akin Oyedele has more here.

3. Want to be successful in markets? You need your EQ to succeed. This is so true. Rachel Butt reports that over his 40-year banking career, James Runde learned that being just as smart and hard-working as his colleagues isn’t enough.

Instead, developing emotional intelligence, or “EQ,” is key to getting ahead in markets. “Without EQ, it’s likely that you will be your firm’s ‘best-kept secret’ — not recognised, not appreciated, not promoted and, often, not properly compensated,” Runde wrote. “Developing EQ is just as pertinent for the recent graduate who is starting out, as it is for the seasoned veteran.

What he said.

4. Deutsche Bank shares made a new low and another German bank had to cancel a bond issue overnight. The woes continued for Germany’s biggest lender overnight as its stock price hit a new record low.

It’s all part of the fallout from the US Department of Justice fine of around $14 billion Deutsche might have to pay and German chancellor Angela Merkel saying there will be no state aid for the ailing bank. But things got a bit real for the German banking sector as a whole last night with NordLB cancelling a 500 million euro bond issue. Contagion folks – remember 2008 and 2009?

5. Bank of Japan Confesses: Even We Don’t Trust the Bank of Japan. The headline of the day has to go to the folks over at the Wall Street Journal for this one. James Mackintosh has dug, really dug, into appendix three of the BoJ’s recent comprehensive assessment of monetary policy and found that the BoJ in essence says “long-run inflation expectations depend in large part on where inflation has been, not on the 2% target the BOJ sets for it to be in future”.

That, of course, makes sense. But it makes the attainment of the BoJ’s 2% goal, when it is a serial under-shooter on that front, very difficult. So, Mackintosh says the BoJ, in abandoning the money base target, is trying to get things moving by being “credibly irresponsible”.

6. OPEC doesn’t appear to be any chance of a deal until at least November – and when Iran gets back to pre-sanction levels. It looks like I’ll be able to get petrol back near $1 a litre once the school holidays are over. That’s because the Aussie dollar is strong and OPEC is no closer to a deal after the Iranians again affirmed they won’t consider any production cap until they hit pre-sanction levels.

That knocked prices down almost 3% at one point. But they have recovered a little since then and the Iranians are saying a deal could get done at OPEC’s November meeting.

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)
US: Presidential debate: Clinton ‘wins’
CH: Industrial profits (y/y%), Sep: 19.5 vs. 11.0 prev.
US: S&P-CS house px 20 city (y/y%), Jul: 5.0 vs 5.1 prev.
US: Markit services PMI, Sep P: 51.9 vs. 51.2 exp.
US: Consumer confidence, Sep: 104.1 vs. 98.8 exp.

And now from CMC Markets’ Michael McCarthy is today’s Stock of the Day

Wesfarmers – big picture

Traders jumping around on 5-minute charts rarely step back and take a look at the big picture. But they should. Knowing where a stock is relative to its history can be very important. Shareholders wrestling with their Wesfarmers (WES) exposures may wish to take the weekly chart below into account when deciding.

It’s especially relevant to those contemplating whether the Coles earnings machine and the Bunnings growth engine are running as hot as they can. If this is as good as it gets for these businesses, the WES share price could come under pressure, despite a recently improved coal outlook.

A P/E ratio around 19x and a dividend yield around 4% are “ok” if growth around 8-10% is achievable. Growth below that range would imply WES is expensive. Now look at the chart. $45.50 is a clear, long-term resistance level. At $44.00 WES is still more than 3% below that level. However, it’s more than 30% above key support at $30, and more than 65% above its post GFC lows. It’s not hard to make a case that selling WES is less risky than holding on.


Michael McCarthy, chief market strategist, CMC Markets

You can follow Michael on Twitter @MMcCarthy_CMC