Here's your 20-second guide to what Australian traders will be talking about this morning

Spencer Platt-GettyImages

A quick recap:

Crude oil and all its variants got crushed last night as inventories continue to build. The EIA reported this morning that stockpiles rose around four times what the market had expected. As a result, the front month Nymex crude is down close to 3% and under $42 for the first time since the recovery from the August lows around 10 weeks ago.

That hurt stocks and we look set for a down day on the ASX today as a result of the weakness in Europe and the US. With all three big US indexes off more than 1% just a little before the close, and Europe down on average more than 1.5%, traders in overnight futures markets have knocked the SPI200 down more than 1% as well. At around 7.45am AEDT the December contract is down 59 points at 5,072.

Plenty of Fed speakers were out last night and it’s worth noting they were all on script. December looks like a lock and that is clearly weighing on stock traders’ minds as well.

That could make things worse today on the ASX depending on how traders feel. With BHP under pressure still and a question in the media today about whether ANZ can keep up its franked dividend policy, the banks might find themselves pressured as well. It all adds up to a tense time for the local Australian share market bulls.

Likewise, with copper crashing again with an overnight fall of 2% to $2.17 a pound – another post 2009 low – and iron ore down again overnight, pressure is coming from everywhere.

The Australian dollar bulls might be scratching their heads a little today as well. After a fast push higher on the back of the unexpectedly strong employment data, the Aussie dollar ran into a wall of selling around 0.7150. Of course, that’s the top of the current downtrend channel. So it’s a natural place to sell and the day-on-day gain of 0.95% still makes the Aussie the best performer of the major currencies. Even if it is off the highs.

Elsewhere on forex land, important in the context of the big falls on European stock markets (DAX down 1.88% and CAC down close to 2%) were comments from ECB president Mario Draghi last night that he’ll deploy all available monetary weapons if needed. “Downside economic risks are clearly visible… inflation dynamics have somewhat weakened… and if price stability is at risk, we would act by using all the instruments available within our mandate,” he said. But euro rallied off the lows below 1.07 and stocks sold off.

One other thing that’s important from overnight, as the NAB’s co-head of currency strategy Ray Attrill noted this morning, is the latest Chinese loan data released last night. “This showed new CNY loans slumping to Y514bn from Y1050bn in September, with broad ‘Total Social Financing’ credit growth even weaker at 477b down from 1302bn. There is a suggestion this is partly related to local governments switching to cheaper forms of (bond) finance, but the news has nevertheless played to concerns about aggregate demand,” Attril wrote. He noted this was part of the commodity selling – Dr Copper anyone? I’d add that it doesn’t matter how low the RRR goes in China, if no one wants to borrow, or the banks won’t lend, the economy won’t improve. Bad news and it bears watching.

On the data front today, we have nothing in Australia but some important second tier data from Japan on industrial production and capacity utilisation. Then it’s some important releases overnight. French, Italian, Portuguese, EU and German GDP is out along with French payrolls data. Then it’s the big one in the US to end the week with the release of retail sales. PPI is also important, as is business inventories. But European GDPs and US retail sales make it another huge day for markets.

The overnight scoreboard (8.10am AEDT, NB: US Market close is 8am AEDT):

  • Dow Jones Industrials -1.44% to 17448
  • Nasdaq Composite -1.22% to 5005
  • S&P 500 -1.4% to 20455
  • London (FTSE 100) -1.88% to 6178
  • Frankfurt (DAX) -1.15%
  • Tokyo (Nikkei) +0.03% to 19679
  • Shanghai (composite) -0.45% to 3633
  • Hong Kong (Hang Seng) +2.4% to 22888
  • ASX Futures overnight (SPI December)  -59 to 5172
  • AUDUSD: 0.7123
  • EURUSD: 1.0810
  • USDJPY: 122.57
  • GBPUSD: 1.5230
  • USDCAD: 1.3283
  • Nymex Crude (front contract): $41.61
  • Copper (US front contract): $2.17
  • Gold: $1,084
  • Dalian Iron Ore (January): 347.5 (denominated in CNY)
  • US 10-year bond rate: 2.31%
  • Australian 10-year bond rate: 2.97%

Other news:

“The coming year is likely to prove to be a watershed in global economic history,” says Credit Suisse head of research Ric Deverell. That’s a massive statement but it’s not the only one in the bank’s 2016 global outlook released overnight. Deverell and his team have thrown a bunch of different economic outlooks, divergent central bank policies, prices for stocks, bonds, commodities and currencies into their blender and come up with 10 trades for the year ahead. Of course, as is the way with such things, some of them are going to be way off but some will likely work superbly. Either way, they are all interesting. Here’s the piece I wrote earlier.

– If you are wondering what the heck is going on with the price of crude oil at the moment, wonder no more. This chart, of the seasonal inventory levels, I saw float past on the Westpac markets team’s Twitter feed says it all:

Source: Twitter Screenshot

Supply and demand folks. Supply, too much of it, and demand… meh.

– One more thing. As readers know, I’m a trader. We like charts and we particularly like trendlines. They are easy ways to judge a trend, its persistence or otherwise. So I’ve been watching the uptrend in Australian unemployment that stretches all the way back to the GFC in 2008 for ages. Guess what? It broke yesterday with the big 0.3% fall in the unemployment rate. Here’s a link to the piece I wrote earlier.

And now from CMC Markets’ Ric Spooner is today’s Stock of the Day

Wesfarmers

Yesterday’s job numbers feed into the story told by the Westpac Consumer Confidence survey earlier in the week. Even allowing for some statistical noise, there is trend improvement in the labour market. Consumers are noticing this and it’s feeding through into confidence. Westpac noted that consumers have a much less pessimistic attitude towards the labour market than they have had for several years. At the same time the sub index on whether this is a good time to buy a major household item is improving.

It’s true that shoppers are probably not in a mood to go wild. Wage growth is still low, the population is ageing and household debt levels are relatively high. Even so, there looks to be a decent chance that this could be a better Christmas for retailers than many have been forecasting. That makes Wesfarmers which again bounced off chart support last week look interesting. Shopper confidence can only be a good thing for the owner of Coles; Bunnings; Office Works; Kmart and Target.

Ric Spooner, chief market analyst, CMC Markets

You can follow Ric on Twitter @ricspooner_CMC

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