The volatility continues. But today it’s upside vol with stocks in the US choppy but higher at the close.
Europe missed the rally however and overnight futures traders in the ASX SPI200 December contract have been left a little cold by the late sell-off in the US which left the S&P 500 up just a couple of points. As a result futures are pointing to a 12 point loss when the market opens this morning.
After’s yesterday’s big moves traders won’t be sure what to do today. That means it’s really going to depend on whether the banks can, individually or collectively, pick up after yesterday’s weakness. It also depends on the impact of oil on the miners now that crude is making fresh lows again.
In other markets, the US dollar was a little stronger across the board last night. The Aussie has dipped back a little after yesterday’s post-employment data surge. The Kiwi has remained strong after the RBNZ kicked the ball into its own net yesterday. But, as traders focus on the Fed next week, and with stocks up nicely in the US, the euro has lost 0.8% and is back at 1.0935. The US dollar is also continuing to push the Chinese yuan weaker and the spread between the official onshore rate and the offshore is as wide as it’s been in months.
So, the scoreboard (8.09am):
- Dow: 17,574.75, +82.45 (+0.47%)
- S&P 500: 2,050.09, +2.47 (+0.12%)
- SPI200 Futures: 5,027, -12 (-0.2%)
- AUDUSD: 0.7273 +0.0046 (+0.64%)
And now, the top stories:
1. Atlassian IPO roars. Traders will be wishing they got some, or more, of the Atlassian IPO action. That’s after the company’s shares surged in its trading debut on NASDAQ. After setting the IPO price at $21 a share, raising $462 million and giving the company, trading under the TEAM handle on Nasdaq, a $4.4 billion valuation, shares opened at $27.67 before hitting an early high of $27.95. The price drifted back a little but it’s surging toward the close and is trading at $27.93, up 32.99%.
Well done TEAM. You can read more here.
2. Australian employment. Traders, especially the interest rate kind, will still be rubbing their heads in wonder about the amazing strength in Australia’s jobs market. The economists’ verdict is in and, for the most part, they are stunned but agree the labour market is strong and the RBA will be in no rush to ease.
Here’s my favourite chart of the jobs market. GFC uptrend in unemployment – BUSTED:
3. No wonder oil is down, OPEC is pumping at its fastest pace in 3 years. The price of oil has continued to make fresh post-GFC lows this week. That’s after OPEC upped its notional production cap at its semi-annual meeting last Friday. But in news overnight, BI US’s Akin Oyedele reports that OPEC pumped 31.695 million barrels in November. That’s up 230,100 barrels from October and also the fastest pace of production in 3 years.
No wonder we got no agreement and lower prices and Nymex crude is trading at a fresh low of $36.73 this morning. You can read more here.
4. The Bank of England just highlighted the fall in oil will impact central bank policy. Last night the Bank of England left rates in the UK at 0.5%. But more importantly, it became the first significant central bank to highlight that the big fall in oil over the past month is “material news” and increased the likelihood that inflation remains subdued.
As we edge toward the Fed rate rise next week, that’s important because central bankers around the globe have been pinning their hopes on an oil recovery, or least no more falls, to help increase inflation in 2016. But the crash in prices threatens their claims, most recently made by RBNZ governor Wheeler yesterday, that inflation will be rising again soon.
It also means the market has started to think the Fed might signal it won’t be too aggressive when it raise rates next week. That sets up some chance of disappointment for traders next week.
5. Bond market landmines. If there is one theme that keeps coming up in the numerous “outlooks” for 2016, it is the risk around corporate leverage. Mostly in emerging markets and China. In general, not a lot of people pay too much attention to these sorts of risks nor what’s going on in corporate bond markets. That’s too bad because over the last 20 years or so, most of the significant global market dislocations have been related to ructions in interest rate or debt markets.
So it’s worth highlighting that the analysts at Citibank reckon the bond market is littered with landmines.
Oh, and as if on cue, the Wall Street Journal reports this morning that a high yield debt-fund has blocked investors from pulling out their money.
6. Goldman Sachs says US companies will buy back $450 billion in stock during 2016. Cash inflows aren’t a guarantee that the stock market will rise. But MarketWatch reports this morning that Goldman Sachs says companies are going to inject $450 billion “through buybacks and cash M&A” into the stock market next year. That continues the trend of the past 5 years which has seen the corporate sector as the biggest source of US stock market buying, Goldman’s chief US equity strategist David Kostin said.
Adding up all the expected flows, he reckons around $225 billion will flow into the market. Sounds like if traders can pick the right stocks they might be able to outperform the market. You can read more here.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Woolworths failed to gain any share price traction after its AGM. Instead it’s clinging unconvincingly to long term support levels. The prospects for turnaround are medium term and the market is likely to need evidence that the business is stabilising before getting too interested.
In the meantime, the risk of further bad news remains. Yesterday’s announcement that the ACCC is taking Woolworths to court is a case in point. The ACCC is alleging unconscionable conduct against suppliers in 2014. This relates to Woolies demands for extra payments allegedly above contract agreements with suppliers apparently given 4 days to pay.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC