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

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A quick recap:

It looks like it might be another day of gains on the ASX today after stocks in the US and Europe pushed higher and oil fairly rocketed, up almost 4%.

That’s left the ASX 200 December SPI futures up another 28 points in overnight trade to sit at 5,256 a little before the close of US trade. That’s a good sign after yesterday’s 1.42% rise. The banks were back in favour yesterday and may be again today but it will be interesting to see the wash-up of the big energy spike and continued iron ore slump across the various companies affected today.

Looking at the US now, with a little over 20 minutes of trade left, the Dow is up more than 100 points, 0.6%, the Nasdaq is up 0.4% and the S&P 500 is slowly closing in on its all-time highs with a 0.5% gain. The NAB reckons this “firmer risk tone” has been boosted by the big surge in crude and the energy complex.

While nothing really matters in US data this week, except non-farm payrolls on Friday night, the solid data last night certainly points toward Fed liftoff in December. Factory orders in the US fell 1% in September as expected, the ISM New York lifted and auto sales figures beat expectations by a mile with a print of 18.2 million against expectations of 17.7 million units. Chain store sales were also up.

But traders aren’t fussed for the moment.

In Europe the DAX was flat, the FTSE climbed out of the doldrums late in trade after Standard Chartered released a shock loss and announced a capital raise of more than $3 billion pounds.

On currency markets, the Aussie held onto the post-RBA gains near 72 cents. BNZ’s Raiko Shareef said the “AUD’s squeeze higher did not simply come courtesy of the unchanged rate decision (markets had priced near-50% for a cut), but also the peppier language on activity data.” On the other majors, ECB president Mario Draghi is clinging to his weekend attempt at obfuscation about his intentions at the next ECB meeting saying overnight that that the “degree of monetary policy accommodation will need to be re-examined”. BNZ’s Shareef said “the market shrugged this off, still very convinced that the ECB will ease in some dimension or another come December”. Euro is down 0.4% at 1.0960ish. The Canadian dollar is benefiting from the oil spike while the Kiwi is down again.

On rates markets, the data helped push rates rise a little, with yields higher in the US overnight. US 2-year yields were up almost 1 point to 0.766% with US 10-year yields up by 4 points to 2.22%. Australia’s rates rose yesterday as well and the 10-year bond is now 2.68% from below 2.6% earlier this week.

Besides the big jump in oil, gold was hammered lower last night and is back below $1,120. No need for the precious metal if all is good in the world and stocks are rising. Copper is rising again and is at $2.33 a pound.

On the data front today, we have the release of the AiGroup services PMI this morning and then trade data and retail sales later this morning. It’s services PMI day around the globe so there will be a raft of releases – Chinese data is out at 12.45pm AEDT. Besides PMIs in Europe and the US, we get the ADP employment report in the US, along with US trade and a speech from Fed chair Janet Yellen.

The overnight scoreboard (7.51am AEDT, NB: US MArket close is 8am AEDT):

  • Dow Jones Industrials +0.54% to 17,924
  • Nasdaq Composite +0.34% to 5,144
  • S&P 500 +0.37% to 2,111
  • London (FTSE 100) +0.34% to 6,383
  • Frankfurt (DAX)flat at 10,951
  • Tokyo (Nikkei) -2.1% to 18,683
  • Shanghai (composite) -0.2% to 3,318
  • Hong Kong (Hang Seng) +0.89% to 22,568
  • ASX Futures overnight (SPI December) +28 to 5,256
  • AUDUSD: 0.7196
  • EURUSD: 1.0960
  • USDJPY: 120.99
  • GBPUSD: 1.5423
  • USDCAD: 1.3047
  • Nymex Crude (front contract): $47.84
  • Copper (US front contract): $2.3315
  • Gold: $1,116
  • Dalian Iron Ore (January): 348.5 (denominated in CNY)
  • US 10 year bond rate: 2.22%
  • Australian 10 year bond rate: 2.68%

Other news:
– The RBA didn’t disappoint yesterday with the announcement of the decision to leave rates on hold. Like other central banks trying to give a little bit of something to everyone, not only did they acknowledge that the Australian economy has improved, they also opened the door for a rate cut if necessary.

Here the final paragraph:

At today’s meeting the Board judged that the prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate at this meeting. Members also observed that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand. The Board will continue to assess the outlook, and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target.

That, ladies and gentlemen, is a bet each way from Australia’s central bank.

That’s not to say that I think the traders who took the Aussie higher were wrong or that the bank has misstepped. Overall, I think as the last paragraph says there is no rate cut unless the domestic economy weakens from here. And, for me, I didn’t think it (the economy) would until I’d seen the recent fall in inflation. Gives me pause. Clearly the RBA is watching too.

YOU HAVE TO READ THIS BI US Julia La Roche has a great piece with Paul Singer on the site this morning where he sums up exactly what’s worrying so many traders and investors at the moment. Singer said that “everything in the market is more dangerous than it used to be”. I won’t steal all her thunder, you can read the full piece here, but here’s the quote I loved from Singer:

The fact that the ‘recovery’ after August 24th was just about as fast as the collapse should be of no comfort to those who understand that the market mechanism as currently structured and organised is unsound, with the scope and intensity of future episodes just waiting to be unlocked…

What he said.

– That’s important in the context of where the S&P 500 sits right now. Just a per cent or so below the all-time highs. The market is the market but there are some wondering about valuations. John Manley, chief equity strategist at Wells Fargo Advantage Funds, told MarketWatch: “I suspect that being over 2,100 on the S&P is making investors think a little too much. Earnings growth is no better than OK but they are far from bad. Valuation is about neutral. The Fed has put us on alert that they may move in December.”

But others like Andrew Adams, chief market technician at Raymond James, said: “I’m not really sure what has changed over the last 31 days to justify this run… several indicators I follow are extremely overbought at the moment and the risk level remains elevated for some sort of short-term pullback.”

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

CBA

With the Cup behind us, traders will be starting to think Christmas rally in the stock market. As usual, the big banks will be crucial. They don’t look expensive compared to valuation levels over the past couple of years so there looks to be upside scope if buyer confidence returns. CBA for example is currently trading at about 13.9 times forward earnings.

From a chart point of view, it’s certainly possible that a major rally could kick off from here. However, this doesn’t look the most likely alternative to me.

For starters, despite yesterday’s gains, CBA stayed within Monday’s range which is a pretty neutral scenario. Volume shown in the box below the chart has also been light which is not convincing. The last 2 major lows showed much more significant volume spikes and conviction.

Monday’s low hit the 38.2% retracement level which is only a shallow correction. It wouldn’t surprise to see a bit of a bounce off this level and a good indication of this would be a move past Monday’s high.

However, there’s a good chance that a near term bounce could be followed by a deeper move lower. A move back to lower retracement levels and the blue trend line followed by a higher volume turning point after the other 3 banks go ex-dividend would be a much more obvious starting point for a Christmas rally.

Ric Spooner, chief market analyst, CMC Markets

You can follow Ric on Twitter @ricspooner_CMC

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