First, the big news – your 20-second guide is evolving and from next week will be found on Business Insider titled “6 things Australian traders will be talking about this morning”.
There was another terror threat early this morning with a football match between Germany and the Netherlands being abandoned and the stadium evacuated in Hannover. A rock concert in the city was also cancelled and the police chief said there were real and credible threats.
US stocks were already having an up and down day but the threat news turned the market lower with the Dow down around 150 points from the high of the day at one stage. It’s making a late recovery and dragging itself out of the red but the S&P 500 is still down a few points. The Nasdaq has just moved out of the red.
That’s a stark contrast to the positive tone we saw in Asia and then in Europe last night where even the laggard FTSE in London managed a 2% gain. The CAC in Paris was 2.77% higher while the DAX rose 2.41%. Europe was playing catch-up to the US rally the night before but it rose also after ECB chief economist Peter Praet told Bloomberg the governing council would discuss whether there is a case for further action in the context of heightened uncertainty.
But with US stocks up and down around flat it’s likely to be a very different day’s trade on the ASX to the one that traders expected after they went home yesterday after pumping up the ASX by 114 points or 2.2%.
Certainly futures are only down 28 points at the moment, with the Dec SPI200 contract at 5099. I’m betting it could be a much poorer performance though with the rout in iron ore (-1.92% in US futures), crude oil (-2.42%), Dr Copper (-1%, another 6 year low), and gold (-$11.70 after making a new 5 year low at $1064) overnight likely to weigh on traders today. Chris Weston from IG tweeted this morning that BHP is going to open down more than 3%. That in itself has got to hurt.
In contrast to what could happen on stocks today, the Australian dollar is super strong above 71 cents when you consider the moves in commodities. It’s still stuck in the current downtrend but there are murmurs that a trend break might be coming from the trading community which watches these things. A break of 0.7160 would be an indication that a rally is underway.
To put the Aussie performance into context, last night it rose 0.32% while euro fell a similar amount, the yen lost about 0.2% and the Kiwi lost 0.32%. Strangely, given the big drop in crude, the CAD didn’t crash. So the Aussie is gaining on the crosses… but something might be up.
On bond markets, the sell-off in stocks saw rates dip a little bit. In reality though the focus is firmly on the Fed so unless risk goes right off and stocks swoon, bonds are likely to remain somewhat elevated to recent yields. Aussie 10s at 2.91% while the 2s are at 2.03%.
On the data front today we have a speech from RBA assistant governor Guy Debelle at 9.15am. Later in themorning we get the Westpac leading index of economic growth and the wage price index for Q3. It’s fairly quiet otherwise with EU construction, mortgage applications and housing starts in the US and a Fed Speech-nado with Mester, Dudley and Lockhart all speaking.
The overnight scoreboard (8.14am AEDT, NB: US Market close is 8am AEDT):
- Dow Jones Industrials +0.04% to 17489
- Nasdaq Composite +0.03% to 4986
- S&P 500 -0.12% to 2050
- London (FTSE 100) +1.99% to 6268
- Frankfurt (DAX) +2.41% to 10971
- ASX Futures overnight (SPI December) -28 to 5095
- AUDUSD: 0.7117
- EURUSD: 1.0645
- USDJPY: 123.39
- Nymex Crude (front contract): $40.80
- Copper (US front contract): $2.09
- Gold: $1,069
- Dalian Iron Ore (January): 338.5 (denominated in CNY)
- US 10-year bond rate: 2.27%
- Australian 10-year bond rate: 2.91%
– China is going through an uncomfortable period for growth and the economy as the the current regime in Beijing drives necessary change to the governance regime and structure of the economy and economic growth. That was never going to be comfortable and it meant, and the president and premier knew, that growth would slow as the necessary adjustments were being made to the economy.
It’s not an easy transition and it’s not without risk. But the underlying premise, on which this regime change is being driven, appears to me to be all about ensuring that the benefits of China’s emergence are concentrated in the hands of the few.
Anyway, Wall Street is really worried it could all go awry, BI US’s Linnette Lopez wrote this morning.
– BI US’s Akin Oyedele reports this morning that “Inflation, as measured by the Consumer Price Index (CPI), rose for the first time in three months in October. CPI rose 0.2% month-on-month, and 0.2% year-on-year, right in line with expectations. Excluding volatile food and energy costs, core CPI rose 0.2% month-on-month, and 1.9% year-on-year.” Lock in that Fed hike, folks.
– The big banks fairly rocketed on the ASX yesterday and we heard from the Commonwealth Bank that it thinks it can gain a sustainable competitive advantage by being seen as the “ethical bank”. Leaving aside what the CBA’s board is implying by making that statement about its embedded culture and that of its peers, it’s clear that perhaps the Big 4 are starting to get that if they want to make 15% return on assets when they are essentially government guaranteed, they better play nice with their customers. It’s a big change to the banks I grew up with and have been watching over the post-GFC era bullock their way through the Australian financial landscape. But it’s also something that Australia’s top banking watchdog reckons might now be a new trend. Here’s his withering critique of Australia’s banking culture.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Qantas passed another milestone in its financial recovery yesterday when S&P upgraded its long term credit rating from junk to investment grade.
This was timely. The stock price had just spent the first 2 trading sessions in over a year below the 200 day moving average. Yesterday’s announcement retrieved this situation with the stock closing on its high and back above the average after jumping 6%.
Ric Spooner, chief market analyst, CMC Markets
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