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

NEW YORK, NY – OCTOBER 05: Traders work on the floor of the New York Stock Exchange (NYSE) on October 5, 2015 in New York City. Despite mixed economic news in recent days, the Dow Jones industrial average rose over 300 points in trading today. (Photo by Spencer Platt/Getty Images)

A quick recap:

Friday night was a good night for stocks with a sea of green across European and North American markets. They weren’t huge moves by any stretch of the imagination but the better-than-expected University of Michigan consumer confidence and a good earnings report from GE certainly helped underpin a positive tone.

That points to a positive open here in Australia today with December SPI200 futures up 22 points in trade on Friday night, closing at 5,268. But whatever happens at the open the reality is that the tone today, and for global markets this afternoon and tonight, will be set by the release of Q3 Chinese GDP at 1pm AEDT today. The market is expecting 6.8% which is not terrible when compared to the 7% official target. Such an expectation though, leaves room for a reaction if the data prints 7% or something toward the ANZ’s forecast of 6.4% growth for the year. It’s a huge start to the week and you can find my diary of all the key events and data here.

On forex markets, the Aussie dollar continues to lose ground again. Friday saw it slip after a couple of fresh calls for a lower RBA cash rate in November, including one from UBS, and a tacit admission from Bill Evans that while the RBA won’t rush, they probably will react to tightened financial conditions if the other majors follow Westpac’s 20-point hike last week.

So the Australian dollar this morning is sitting at 0.7250 with downside pressure. Unless of course Chinese data surprises on the upside. In other currencies, there wasn’t a lot of movement in the majors with the US dollar only mildly firmer. On emerging markets, there was a bit of downward drift however with EM currencies.

On commodity markets, Nymex crude was a little higher but copper fell back to $2.40 a pound. Gold drifted a little lower as well but iron ore was up a tiny bit.

Everyone is waiting for China today.

Speaking of data, besides the Chinese release of GDP we also get Chinese retail sales (market expectation +10.8%), urban investment (+10.8% expected), and industrial production (+6% expected) at the same time. That’s huge.

There is nothing out in Australia today; indeed, it’s a quiet week. Tonight we get the release of the Budesbank’s monthly report in Germany and the NAHB housing market index in the US.

The overnight scoreboard (7.42am AEDT):

  • Dow Jones Industrials +0.43% to 17,215
  • Nasdaq Composite +0.34% to 4,886
  • S&P 500 +0.46% to 2,033
  • London (FTSE 100) +0.62% to 6,378
  • Frankfurt (DAX) +0.39% to 10,104
  • Tokyo (Nikkei) +1.15% to 18,096
  • Shanghai (composite) +1.62% to 3,391
  • Hong Kong (Hang Seng) +0.78% to 23,067
  • ASX Futures overnight (SPI December) +22 5,268
  • AUDUSD: 0.7256
  • EURUSD: 1.1355
  • USDJPY: 119.36
  • GBPUSD: 1.5439
  • USDCAD: 1.2903
  • Nymex Crude (front contract): $47.26
  • Copper (US front contract): $2.407
  • Gold: $1,176
  • Dalian Iron Ore (January): 371.5 (denominated in CNY)
  • US 10 year bond rate: 2.02%
  • Australian 10 year bond rate: 2.58%

Other news:

– It is the hugest of huge days for markets in Asia today with the release of Q3 2015 Chinese GDP. HSBC neatly summarised why Asia/China is so important to markets at the moment in a piece over the weekend and David Scutt has a great preview of the data.

But what’s caught my eye, and it might be a sign that the 5th plenary session at the end of the month could be about to downgrade growth, is a piece my friends over at ForexLive covered on the weekend. Mike Paterson reported that Premier Li said 7% growth “isn’t easy” and that he also called for banks to get behind business to provide “necessary funding” to companies that are currently struggling but have promising prospects.

We need to get the GDP out of the way today at 1pm AEDT. But Li is certainly suggesting that more easing will come if necessary. And of course, with the RRR where it is, there is plenty of money that can flow into the banking system if the CCP decides that is what it wants to do.

– Just quickly on the US TIC data that was released on Friday night. That data, which maps the flows into and out of US capital markets, showed that “foreign official institutions sold $41.12bn worth of Treasuries and which was only partially offset by $9 bn. worth of buying by the foreign private sector.” The NAB’s global co-head of currency strategy Ray Attrill wrote this morning. Hasn’t hurt yields though with US 10s still only a little above 2% this morning.

– Interesting article I picked up on SeekingAlpha last night by Wolf Richter. Richter says that “Moody’s has jumped on the recession-warning bandwagon” noting that only one junk bond has been issued in the US in the past three weeks and then only in the US. Richter reports John Lonski, chief economist at Moody’s Capital Markets Research, said: “This is shaping up to be the worst October for the worldwide issuance of high-yield bonds” since October 2011. That means there is “reduced access to financial capital”. Lonski also highlights that total business sales are collapsing on a year-on-year basis. Recession anyone?

– An one more thing. Goldman Sachs is still calling for a Fed rate hike in December. I note this because I thought they’d moved out into 2016. But in a note from Jan Hatzius and his economics team, Goldman says:

We still expect a rate hike at the December FOMC meeting. The leadership has signaled that such a move is likely if the economy and markets evolve broadly as expected, and our forecast is similar to theirs. However, we are only about 60% confident. Most of the uncertainty relates to the possibility that the economic and market environment—or in a broad sense, “the data”—will be worse than the FOMC’s (and our) expectations.

But, if they are going to hike, Hatzius says the Fed has to get busy and talk market expectations of such a hike up from their current 30%-40% probability. It’s a little bit of a bob each way. But it’s worth noting because if this sentiment grows, the stock market rally could once again come under pressure.

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

Rio Tinto

Rio’s third quarter production report released on Friday looked solid enough. Iron ore is by far its biggest business and production looks on track to reach its 340m tonne target in 2015. Unlike, Fortescue however, this report contained no upside surprises and disappointed the market a touch.
Rio’s share price will also be sensitive to today’s release of Chinese economic data. It heads into these numbers with its chart looking vulnerable to a downward correction.
Last Monday’s high stopped neatly at the previous peak and 200 day moving average. It also moved above the upper Bollinger Band indicating strong momentum. However, if it makes another trend peak soon this will be well below the upper Bollinger Band indicating much weaker momentum. This will set up for a double top or “retest” type formation and potential for a deeper downward correction.

Ric Spooner, chief market analyst, CMC Markets

You can follow Ric on Twitter @ricspooner_CMC

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