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

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A quick recap:

The S&P 500 is down around 0.25% this morning and resting on important technical support. Given it’s Veterans Day when the bond market is closed and a fair number of traders are absent, that’s not a terrible result.

But given the positive leads that Asia, and especially Europe, handed the US and the fact that the highs of the day were at the open, you could argue that US stocks are starting to find the air a little thin up there near their all time highs. That’s my working hypothesis for US and German stocks at the moment.

Locally, the ASX200 bounced off important support from the August lows earlier this week. It had a good day yesterday gaining around half a per cent on the back of strong consumer confidence and better tone in the market. Overnight however, the SPI200 December contract is down 20 points to 5,109. Employment will be the key today but traders will be eyeing the week’s lows if the ASX starts to dip again.

And dip it might, given the pressure that BHP remains under and the big fall in crude oil last night which took the front Nymex contract under $43 at one point last night. The banks also seem to be looking for a level where investors are comfortable to buy again as well.

Elsewhere on commodity markets, gold is down again at $1084 while copper remains in the doldrums. Iron ore in Dalian terms was down a little but UP in US terms.

On forex markets, the Aussie dollar is doing okay and continues to hold above this week’s lows. That’s frustrating some bears and while most forecasters still think the Aussie will head into the mid 60 cent region, it seems some big money is starting to think the Australian dollar’s rout is over. I’ve covered that from an NAB survey released overnight here.

Elsewhere on forex, the euro is up a little, the yen has strengthened and sterling is up above 1.52 again after some decent employment data was released last night. The unemployment rate of 5.3% was only a smidge better than the 5.4% expected but it supports the notion that the Bank of England will be raising rates in 2016.

On the data front today, all eyes will be on the release of Australia’s labour data at 11.30am AEDT. The market is expecting a rise of 15,000 jobs for last month but the NAB says based on their business survey employment sub index, it could print as high as 25,000. Expectations for the unemployment rate are a print of 6.2%.

Also out this morning are Japanese corporate goods prices and machinery orders and then tonight we get CPI in Germany and France, another speech from Mario Draghi (last night was a non-event) and then jobless claims in the US.

We also get a raft of Fed speakers tonight with Bullard, Lacker and Yellen all talking.

The overnight scoreboard (8.03am AEDT, NB: US Market close is 8am AEDT):

  • Dow Jones Industrials -0.32% to 17,702
  • Nasdaq Composite -0.32% to 5,067
  • S&P 500 -0.29% to 2,075
  • London (FTSE 100) +0.35% to 6,297
  • Frankfurt (DAX) +0.7% to 10907
  • Tokyo (Nikkei) +0.1% to 19691
  • Shanghai (composite) +0.27% to 3650
  • Hong Kong (Hang Seng) -0.22% to 22352
  • ASX Futures overnight (SPI December)  -20 to 5109
  • AUDUSD: 0.7060
  • EURUSD: 1.0738
  • USDJPY: 122.83
  • GBPUSD: 1.5210
  • USDCAD: 1.3264
  • Nymex Crude (front contract): $43.00
  • Copper (US front contract): $2.21
  • Gold: $1,084
  • Dalian Iron Ore (January): 347.5 (denominated in CNY)
  • US 10-year bond rate: 2.33%
  • Australian 10-year bond rate: 2.89%

Other news:
– I reckon APRA has sown the seeds of a potentially devastating drop in apartment prices when many of the big projects that were marketed before the 10% investment lending cap and are currently being built hit the market. That’s because there will be a wide range of investors who likely can’t get finance or can’t stump up with what is likely to be bank’s requirements for bigger deposits.

That scary enough. But in an article this morning, David Scutt highlights Australia is in an epic building boom while a key demand signal is tanking. Scutty covers an amazing chart from the economics team at UBS which highlights the potential imbalance between supply and demand.

Put the two together and we might be saying in 6 or 12 months, Australia’s prudential regulator should have been careful what it wished for. That’s because not only could apartment prices come under intense pressure in the areas where there is much increased supply, but also because if prices start to pull back, there could be wealth effect knock-ons in the economy.

Here’s Scutty’s piece.

– There are many laws in economics. The only problem is that most of them are really laws in the physics, chemistry or mathematical sense, but really just axioms. But if there is one “law” I do trust and which is universally accepted as both relevant and correct it is the law of diminishing returns. That is, when you add something it has a benefit at an increasing rate, then it adds benefit at a decreasing rate and then eventually each additional unit starts to subtract from the whole. Think an all-you-can-eat buffet where your 14-year-old just won’t stop. Or think Monty Python’s Mr Creosote..

You get the picture. That’s important because BI US colleague Linette Lopez has written an interesting article overnight highlighting that China is experiencing the dismal effects of the law of diminishing returns. It’s worth a read but the key point is that China keeps doing what it’s been doing but, at an important time in its economic transition, it’s not working that well.

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

Dulux (DLX: ASX)

Dulux had a good initial jump after releasing its results yesterday. However, while it finished up on the day, the stock closed 2% below its high.

The result was solid, with underlying profits up 11.5% on last year. The company noted that lead indicators in its core home renovation markets remain largely positive and said it expects profit growth in the current financial year. Your medium term view on this stock is likely to depend on whether you think the dwelling construction cycle is nearing a peak.

From a chart point of view, yesterday’s price spike looks a decent chance of turning out to be the third and final peak in a neat 3 drives to a high pattern. If the share price confirms this peak by making a lower low, then Dulux could be in for a price correction or at least a period of consolidation.

Ric Spooner, chief market analyst, CMC Markets

You can follow Ric on Twitter @ricspooner_CMC

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