6 things Australian traders will be talking about this morning

Italy’s Prime Minister Matteo Renzi will likely resign if the result of the referendum is a “no” vote. Photo: Laura Lezza/Getty Images

US non-farm payrolls were released Friday showing an around consensus rise of 178,000 while the BLS survey showed the unemployment rate fell to the lowest level since 2007 with a print of just 4.6%.

But even with this, data bonds rallied a little, the US dollar lost a little ground and the big four stock indexes were flat.

Oil continued to climb and is just 50-60 cents a barrel below a potentially big break higher at $51.68 for the front Nymex crude contract. Gold still languishes, although geopolitics is likely to keep it bid.

The wash-up locally is that after a surprisingly large fall of 1% to end the week, ASX futures traders have marked the December futures contract up 21 points. So we’d expect a better open. In many ways though, it depends on the result of the Italian referendum once polls close this morning.

Already forex markets are little cautious with the US dollar and the Japanese yen a little stronger.

Here’s the scoreboard (7.49am AEDT):

  • Dow: 19170 -22 (-0.11%)
  • S&P 500 2191 +1 (+0.04%)
  • SPI 200 Futures (December): 5,465 +21 (+0.4%)
  • AUDUSD: 0.7452 +0.0038 (+0.53%)

The top stories

1. The IMF warned Australia needs to take further measures to shore up the economy to weather any housing market shocks. The IMF has warned that further measures need to be taken to shore up Australia’s economy from shocks to the housing market.

IMF deputy managing director Tao Zhang told the AFR that even though “housing related vulnerabilities are showing tentative signs of stabilisation”, Australia’s dependence on trade leaves us open to protectionist policies. As a result, he says Australia needs “policies that further foster resilience”.

“We’re talking about prudential policies needing to be intensified, with targeted macro-prudential measures and banks being encouraged to robustly increase their capital position into unquestionably strong territory,” Zhang said.

APRA would probably argue they are already on the case.

2. Donald Trump says companies outsourcing operations will face “retribution” and Larry Summers says that’s a threat to American capitalism. President-elect Donald Trump has sounded a lot more presidential than candidate Trump. But he has been pursuing some of the policies that he promised he would during his candidature. One of them was in evidence in his intervention to get Carrier to keep the jobs it planned to outsource to Mexico in Indiana.

Natasha Bertrand reports Trump has been busy on Twitter Sunday US time, saying “the U.S. is going to substantially reduce taxes and regulations on businesses, but any business that leaves our country for another country, fires its employees, builds a new factory or plant in the other country, and then thinks it will sell its product back into the U.S, without retribution or consequence, is WRONG!”

That’s a bad precedent according to former US Treasury secretary Larry Summers, who wrote in a blog that appeared in the Washington Post that “the negotiation with Carrier is a small thing that is actually a very big thing — a change very much for the worse with regards to the operating assumptions of American capitalism”.

That’s the point of Trump though, why the swing states elected him surely – they want American capitalism to change. But this is important for traders because it means politics is likely to play a much bigger role in markets over the next four years.

3. Barclays says China capital outflows at “near-record” levels. The list of actions taken by Chinese authorities recently to involve themselves in the approval of capital outflows down to just $5 million suggested a heightened level of concern. On Friday that concern led to more warnings on outflows through the Shanghai free-trade zone. It’s a sign of stress that suggests the release tomorrow of foreign exchange reserve data from China could be interesting.

Ben Moshinsky reports Barclays analysts Jian Chang and Yingke Zhou said in a note that “Other indicators, such as banks’ cross-border payments and receipts, and banks’ FX purchase and sales, also point to rising capital outflows”.

4. $60 oil – here we come. That’s the view of Gene Epstein writing in Barrons in this week’s magazine. He cites the work of Eric Lee, a senior energy analyst at Citi, who’s work helped the magazine call oil lower, then higher over the past couple of years.

Lee says the likely price cuts will fall short of the 1.2 million OPEC and non-OPEC members agreed last week. But even as breach will be rife, tightening supply will push prices up to $60 a barrel in 2017. But that’s where shale will come online to restrain prices above that, driving the price back under $60 in 2018. Long run, that means there will be enough supply to hold prices below triple digits.

5. Here’s an interesting one if you’re a client of a bulge bracket bank – start dealing or you might find they drop you. Yep. That day has come. Smaller, less active, clients who have been able to coat-tail on the back of the bigger clients who do all the business are about to be cut off by Deutsche Bank, Matt Turner reports. Turner says Deutsche Bank is cutting 3,400 clients off and has decided to reduce the number of sales and trading clients it deals with following a review of its client list.

On a slide setting out these steps, Deutsche Bank said that 30% of its core clients generated 80% of its revenues, with the tail of clients, the other 70%, generating 20% of revenues.

The implication is that smaller clients will be directed to other firms and platforms and more likely to be cut off from Deutsche Bank’s excellent research offering, making their job doubly harder.

6. And here’s everything you need to know about the week ahead. Whether you’re interested in Australia’s potentially disastrous Q3 GDP, the RBA board meeting, the latest from the ECB, or just want to get a handle on the bumper week ahead, I’ve got all you need to know here.

I’m Greg McKenna and you can catch me on Twitter or at AxiTrader where I am the Chief Market Strategist.

From Ric Spooner at CMC Markets, here’s today’s Stock to Watch

Commonwealth Bank

Having completed the classic “partial pullback” from resistance last week, the CBA chart continues to look as though it is setting up for a year end push higher.

Last week’s low at $76.85 is now support and a useful line in the sand. A move below that would be negative and a sign that this stock has yet again failed at the $79.20 resistance. However, unless that happens, the bias looks positive at this stage.

Source: Supplied

Ric Spooner is chief market analyst at CMC Markets. You can follow Ric on Twitter: @ricspooner_CMC

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