Gold collapsed to $1250 an ounce, crude oil in the US surged back above $50 a barrel, US 10s pushed through important resistance at 1.72%, and the USDJPY is sitting above 104 this morning as markets continue to break out from recent trends.
Stocks were largely unchanged in the US however, but the combination of all the moves, and what they mean for individual stocks on the ASX today has futures traders betting it will be a good start to the day’s trade. The December SPI futures contract is up 14 points, 0.3%, suggesting a mildly positive start. There’s likely to be nothing positive for our gold miners today however.
On forex markets, the Aussie dollar has drifted as the US dollar strengthened and it is sitting at 0.7585 off an overnight low in the 0.7560s.
The key to everything, the confirmation or denial of these breakouts, is US non-farm payrolls tonight. Traders the world over are on tenterhooks.
Here’s the scoreboard (7.14am):
- Dow: 18268 -12 (-0.1%)
- S&P 500: 2161 +1 (+0.05%)
- SPI 200 Futures (December): 5,481 +14 (+0.3%)
- AUDUSD: 0.7585 -0.0032 (+0.42%)
The top stories
1. Confusion Over Trump Appeal Means Markets Risk Brexit-Like Shock. I couldn’t recommend this article from Bloomberg any more highly for discretionary traders and investors as we run up to the November 8 US presidential election. Donald Trump doesn’t look to conventional eyes that he’s a chance of pulling off a a victory.
But Tina Fordham, Citigroup Inc.’s London-based chief global political analyst, told Sangwon Yoon that “this is an unusual juncture but we keep looking at it through the same kinds of lenses. What if it’s all wrong because society, technology, opinion polling methods, and everything else don’t capture marginalized voters in the way they might once have?”
Essentially the premise of the article is that traders, investors, and markets are reading the debate, and the outcome of the election with what the father of behavioural economic Daniel Kahneman would call the inside view – what the markets and traders think – rather than the outside view, which is what voters might do.
As the robot from Lost in Space used to say – “Danger Will Robinson”.
2.Could Australia’s trade deficit really disappear? Australia’s trade data yesterday was a little better than the market expected. But within that data, economists at UBS reckon they spy the end to the $2 billion trade deficit which they say could be wiped within months.
Amazing, imagine what that might do to the Aussie dollar. David Scutt has more here.
3. The most important data point in the world is out tonight with the release of US non-farm payrolls in the US. Long bond rates are rising and the US dollar is stronger as traders are again starting to price in a rate hike in the US with the odds of a rate hike in December sitting above 50%, according to the CME Fed Watch tool. That’s an increase of around 10% over the past week as US data has printed a little stronger.
It’s a reflection of better than expected data and it was bolstered by last night’s jobless claims print of 249,000 which suggests the US job market hasn’t looked this good since the 1970s.
Which is a great lead into tonight’s non-farms. Akin Oyedele has a great preview with all you need to know here.
4. US 10-year Treasuries broke their 2016 downtrend overnight. I’ve been banging on about bonds for a while now as they rise amid a change in expectation about the efficacy and path of central bank policy coupled with the return of fiscal policy.
Yesterday I was on my hobby horse with a piece on the possible end to the 35-year long bond bull market and a note about the Aussie 10s getting hammered 20-odd points higher in just a few days.
Last night US 10s drifted outside the downtrend and while I need to see 1.75% break to confirm the move from a trading perspective, a run toward 2% could be on the cards. It’s just another reason why non-farms tonight is a key release.
5. The overhaul in central bank thinking just took an unexpected turn – the BOE is going to stop relying on data. This is wild. Will Martin reports the BoE’s deputy governor for monetary policy, Ben Broadbent, says the bank is going to rely less heavily on economic data when making interest rate decisions in the future.
It’s all about Brexit and Broadbent effectively said the BoE thinks Brexit will hurt the UK economy, but it will take time to show up in the data. So they’ll ignore the data and – my take on his words – keep rates lower, and perhaps ease further, than the data suggest necessary.
No wonder the pound got thumped lower again overnight and is trading at 1.2613, levels not seen since 1985 – the BoE just threw out the rule book.
6. Good news, Mohamed El-Erian says Deutsche won’t be a Lehman moment. The support for Germany’s troubled flagship bank continues to flow with Allianz’s chief economic adviser, Mohamed El-Erian, telling Bloomberg TV Deutsche’s troubles will not lead to “a sudden stop to the global economy” like the one that followed Lehman Brothers’ 2008 failure.
Portia Crowe reports El-Erian highlighted the global banking system is stronger than it was in the years leading up to the financial crisis. And, unlike Lehman, Deutsche Bank “actually has liquidity”, he added.
The bank is also taking other measures to shore up its future and announced 1000 job cuts overnight.
Key data for the past 24 hours (with thanks to BNZ markets)
AU: Trade balance, AUDm, Aug: -2010 vs.-2300 exp.
GE: Factory orders, m/m, %, Aug: 1.0 vs. 0.3 exp.
UK: Unit labour costs, y/y, %, Q2: 1.9 vs. 1.9 prev.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Woodside Petroleum (WPL: ASX)
A good performance by the Energy Sector was a feature of yesterday’s stock market action and may be again today. However, it’s getting to the stage where a degree of caution may be warranted.
Woodside, for example is approaching the $29.75 resistance zone that has put paid to the three previous bursts of optimism this year. OPEC’s plan to limit production and a long awaited improvement in US oil inventories are potential positives for oil but there are headwinds. These include potential production increases by Libya, Iran, Nigeria and the US as well as a stronger $US.
If Woodside can break clearly above the 2016 resistance, however, the next possibility might be up around the 61.8% retracement in the $31.50/$32 price zone.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC