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

Spencer Platt – Getty

Quick Recap

It didn’t turn out to be the day many stock market traders expected just 24 hours ago. The opening trades on US and European futures markets saw prices fall heavily but as the day went on, the futures recovery helped the ASX 200 climb off its lows by the close. So the moves overnight which allowed European stocks to climb back into the black and US stocks to print gains of around 1% sets up a good day for trade here in Australia.

With a little less than 20 minutes to go before the close, the December SPI200 contract is up 51 points, 1%, to 5044. That’s an incredible turnaround from the depths of despair yesterday when the ASX200 was trading 4979 (SPI200 low 4959). But it seems, unfortunately, that markets are becoming used to these types of things. As trite as it seems to write, it’s just another layer of uncertainty in what has become an increasingly uncertain world for markets in 2015.

Equally though, while gold seems incapable of benefiting from uncertainty these days, it seems oil traders thought they should buy Friday’s dip on the potential increase in military activity in Syria and elsewhere. Overnight the front Nymex crude contract has risen more than 3% (it’s ripping toward the close).

That strength, which emerged in Asia and continued in Europe, helped stocks in Europe as the energy sector began “offsetting losses in the travel and leisure stocks,” CommSec chief economist Craig James wrote in a note this morning. The US is still open but rallying into the close.

So we might have a better day today on the ASX after 3 days of weakness. Add another 30 points of rally to the implied 50+ points in the overnight SPI 200 move and the ASX will run headlong into important resistance though. So it’s important to note that copper and other base metals tanked last night. Copper, at $2.11 a pound, is at its lowest level since May 2009.

On forex markets, the strength in stocks helped the US dollar, but the Aussie, euro and others are all off. Naturally the euro is the biggest loser with a loss of 0.83% over the day as it has slipped and held below 1.07 in the past 4 or so hours. That’s not a terrible outcome in terms of price by any stretch of the imagination. But the euro has still made a 6-month low this morning and is at some risk of a cascade lower.

For the Aussie, the tractor beam of euro and yen weakness dragged it lower as traders watch the proximity of the top of the current downtrend and found no reason to buy. The Aussie’s commodity cousin, the CAD, of course has rallied along with oil.

On fixed income markets, the bounce in stocks has put a little upward pressure back on interest rates with the US 2 year rate at 0.85% while the 10 is sitting at 2.27%. Australian 2 years are back above 2% at 2.02, while the 10 is at 2.90%

Last night’s data showed a further weakness in the state of manufacturing in New York with the NY Empire State index missing expectations of a print of -6 with a print of -10.74. Though it’s worth noting that was better than last month’s -11.36. Also out, EU CPI was on expectations at 0.1% for October and 1.1% year on year.

On the day today, RBA assistant governor Kent is speaking at 8.30am, we get ANZ confidence and then the RBA board minutes at 11.30am. Inflation expectations in NZ are out at lunchtime and then the UK has some important inflation report hearings and data to be released tonight. That’s vitally important for expectations of when the BoE might start to nudge UK rates higher. In Germany and Europe, the Zew survey’s are out while in the US, CPI could be huge in helping traders understand the Fed. Industrial production, capacity utilisation, the NAHB housing market index and TIC flows are also out.

The overnight scoreboard (8.01am AEDT, NB: US Market close is 8am AEDT):

  • Dow Jones Industrials +1.38% to 17482
  • Nasdaq Composite +1.15% to 4984
  • S&P 500 +1.34% to 2050
  • London (FTSE 100) +0.46% to 6146
  • Frankfurt (DAX) +0.05% to 10713
  • ASX Futures overnight (SPI December)  +58 to 5052
  • AUDUSD: 0.7093
  • EURUSD: 1.0683
  • USDJPY: 123.17
  • Nymex Crude (front contract): $42.05
  • Copper (US front contract): $2.11
  • Gold: $1,081
  • Dalian Iron Ore (January): 345 (denominated in CNY)
  • US 10-year bond rate: 2.27%
  • Australian 10-year bond rate: 2.91%

Other news:

– Did you hear the one about the Chinese economy being strong? No? Me neither. But apparently there has been a bit of chatter in the US about strong movie ticket sales showing that the economy in Chinese is belting along. It’s an idea pushed by the Peterson Institute’s Nick Lardy to bolster the argument that services are now powering the economy. While that is a necessary transition to the new Chinese economy under President Xi, it seems noted China bear Jim Chanos isn’t impressed with the theory. He sent BI US colleague Linnette Lopez a couple of charts shooting down the idea.

– Speaking of China, no-one seems to care that the IMF is about to add China to its SDR basket. That puts the Chinese currency, the RMB, into the global forex and central banking pantheon with the US dollar, euro, pound and yen. It’s a big deal, I reckon, on par with China joining the WTO, as I highlighted in this piece yesterday.

– And another thing. Why don’t Australians care more about their super and the fees they pay on their super? It’s an enduring question that I wonder each and every day. We all seem to love stories about the Aussie dollar’s rise and fall but talk about super and, meh, who cares? But here’s a thing – you should. Because fat cat fund fees are eating your retirement savings. And if they eat much more, then guess what happens – cat food. You can read more here. Ask questions people. Don’t just look at glossy brochures.

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

BHP

Last week I wrote a note outlining the possibility of a 3 drives to a low pattern on the BHP chart. The pattern was not triggered. The share price fell failed to reject the support line around $20.50. However, the BHP chart remains in an interesting zone in terms of potential turning points (at least for the short to medium term).

Right now it’s at the level where the swing down from March is the same size as the swing that preceded it and which began in August last year i.e. AB=CD as labelled on the long term monthly chart below. If BHP starts to move clearly away from this level around $19.70 it could be a significant low.

If this doesn’t happen, and the share price continues to fall, traders will be eyeing the potential support and psychologically significant level of the 2008 low around $18.69.

Ric Spooner, chief market analyst, CMC Markets

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