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

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First, this is the last edition of your 20-second guide which is evolving and from next week will be found on Business Insider titled “6 things Australian traders will be talking about this morning”.

Quick Recap

US stocks are mixed either side of nowhere this morning having traded in a fairly muted range overnight. That’s a little remarkable given that the data last night was pretty solid and beat expectations.

CommSec chief economist Craig James reports that “new claims for unemployment insurance fell from 276,000 to 271,000 as expected last week. The Philadelphia Federal Reserve index improved from minus 4.5 points to +1.9 points (forecast minus 1.0 point). The leading index rose 0.6% in October (forecast +0.5%).”

That’s more fuel for the rate hike fire but traders seem nonplussed this morning in contrast to yesterday’s move. In Europe, the FTSE and DAX were the standouts rallying strongly overnight. The DAX has broken up and through the 6-month downtrend and briefly traded above the 200-day moving average before pulling back a little.

That divergence of stock market, indeed market, performance is something it feels like we are going to have to get used to as we move toward 2016 and local factors start to overwhelm the big global trades.

Just look at the Aussie dollar’s performance relative to copper, crude oil, and iron ore this week. Last night the Aussie traded above 72 cents for the first time in a couple of weeks. Of course, part of that is a focus by traders on the path of US interest rates which seems to have undermined the big dollar and lifted the euro, yen and sterling higher in the past 24 hours. But a lot of it is about the Aussie dollar itself. You can see more below in other news.

Looking at the wash up of all the moves for stock traders on the ASX today and the SPI 200 is not giving any indication of life. The December contract is just 4 points higher this morning at 5260 after yesterday’s stellar rally when the physical market was up 2.1% with the banks surging again and Rio Tinto belting out a quick 4% gain. BHP was up close to 3% and even Fortescue rose 0.47%. I say “even” because iron ore got slammed again yesterday falling on the Dalian exchange by 3% to 327. It’s rallied 1% overnight, however.

On the day today there is nothing out in Australia of note. China releases its leading index, the BoJ its monthly survey and German PPI is out tonight. Forex traders will be watching Mario Draghi closely and also the speech from Bundesbank president Jens Weidmann. In the US there is only the Kansas City Fed index to be released.

The overnight scoreboard (7.50am AEDT, NB: US Market close is 8am AEDT):

  • Dow Jones Industrials -0.03% to 17733
  • Nasdaq Composite +0.03% to 5076
  • S&P 500 -0.07% to 2082
  • London (FTSE 100) +0.87% to 6329
  • Frankfurt (DAX) +1.14% to 11085
  • ASX Futures overnight (SPI December)  flat 5255
  • AUDUSD: 0.7189
  • EURUSD: 1.0646
  • USDJPY: 122.93
  • Nymex Crude (front contract): $40.42
  • Copper (US front contract): $2.08
  • Gold: $1,081
  • Dalian Iron Ore (January): 334.5 (denominated in CNY)
  • US 10-year bond rate: 2.24%
  • Australian 10-year bond rate: 2.86%

Other news:

– The worm is starting to turn for the Australian dollar it seems. Yesterday the CIO of UBS Wealth in Singapore Kelvin Tan said the Aussie is coming into favour again with growing notions the RBA won’t cut. UOB in Singapore also said the Aussie is finding more support. I followed up my piece here at Business Insider yesterday with a more trader focused piece at AxiTrader after that. You can read it here, but my conclusion is that the Aussie is turning and if 0.7240 goes, watch out.

Here is the weekly chart from yesterday:

AUDUSD Weekly Chart (MT4, AxiTrader)

– I wrote the other day that I reckon China going into the SDR is as important as when it joined the WTO back in 2001. I’d been going to China to talk to SAFE for a couple of years and I got a real sense that change was afoot. Fast forward to 2015 and the next big international step is the internationalisation path of the RMB and its inclusion in the IMF’s SDR basket. As symbolic as it is, in many respects it’s important because it is likely to lock in the path of economic transition, liberalisation and continue to change the shape of the Chinese economy from developing to developed in the decades ahead.

But markets and politics are so immediate these days that the concept of years and decades is lost on many. So, I agree wholeheartedly with the framing Jennifer Hughes used in the FT around the Chinese SDR inclusion. Hughes said, “In all probability it will be like many Chinese financial reforms: significant in hindsight, but harder to get excited about in its early stages.”

Yep, it’s an interesting article. You can read more here.

– Caterpillar is one of those companies that sells the other sort of “yellow metal” that many use as a check on the heartbeat and pulse of the global economy. So it’s sales are often, like Dr Copper’s price, taken as an indication of where the global economy is at. It probably won’t surprise you that Caterpillar has been struggling for a while now. But the bad news, according to Myles Udland from BI US, is that the ugliest chart in the world just got uglier.

“The industrial giant’s sales have now declined for 35 straight months, with October’s 16% decline coming in as the largest drop during this streak and the biggest monthly decline since February 2010,” Myles wrote.


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