Aussie shares look set to open lower as surging commodity costs are actually tempered by a two-and-a-half-year high in the dollar as well as a modest drop on Wall Street.
ASX SPI200 index futures fell 36 points or 0.5 a cent. US stocks finished mixed. Iron ore soared 5 per cent to a fresh multi-year high. Crude oil cracked US$50 a barrel for the first time since March. The dollar climbed to the highest level of its since June 2018.
Wall Street
US stocks struggled as a result of the opening bell amid mixed signals on stimulus talks. A jump in claims for jobless benefits underlined strains on the economy. The S&P 500 pared initial losses to accomplish 5 points or perhaps 0.13 per cent in the red.
The Dow Jones Industrial Average traded either side of 30,000 for much of the session before doing 70 points or perhaps 0.23 every dollar weaker at 29,999. Strength in’ stay at home’ stocks lifted the Nasdaq Composite 67 points or maybe 0.54 every cent.
Hopes for a stimulus deal waxed and waned. Treasury Secretary Steven Mnuchin stated talks had made “a lot of progress”. Democrat House Speaker Nancy Pelosi agreed there had been “great progress”. Yet Republican Senate Majority Leader Mitch McConnell’s office indicated Senate Republicans will not support the most up proposal. The Senate whip John Thune predicted a deal would need to wait until next year.
“If we do not get stimulus by the tail end of the season, you can definitely have a risk off maneuver in the market,” Frank Rybinski, chief macro strategist at Aegon Asset Management, told CNBC.
First-time claims for unemployment benefits climbed from 716,000 to 853,000 very last week, topping 800,000 for the very first time after October. The total was significantly even worse than the 730,000 expected by economists polled by Dow Jones.
“Given the recent behaviour of initial claims, we will likely see further increases in ongoing claims going forward,” Thomas Simons, cash market economist at Jefferies, wrote. “Evidence has been building indicating that claims reach an inflection point in early November due to rising COVID case numbers and forced the imposition of societal distancing policies that actually harm the service segment of the economy.”
Australian outlook
A true mixed bag for local investors this early morning. A lot of positives as well as plenty lots of negatives. Looks like a sharp split forward between losers and winners.
First, the positives. Iron ore soared $7.50 or perhaps five per cent to US$158.25 a tonne, an eight-year peak, according to CommSec. Brent crude settled $1.39 or perhaps 2.8 per dollar higher at US$50.25 a barrel, the first close of its above US$50 since the early days of the pandemic sector plunge.
Energy stocks outperformed in the US, rising 2.9 per cent. tech stocks as well as Financials also rose, 2 more pluses for our market. Wall Street finished well off its great – another plus.
Now to the downsides. Those stellar gains in commodity prices fed straight into the dollar. The Aussie surged 1.2 per cent to 75.35 US cents. The regional currency is traded by a lot of forex players like a traditional commodity proxy.
Some other negatives? The rise in iron ore was brought on by a cyclone from the Pilbara coast. Any harm or stoppages at local producers would dent share rates. Wall Street completed broadly lower. Oddly, the US supplies sector fell 0.7 a cent. Seven straight gains has left the ASX looking vulnerable to further profit taking. The S&P/ASX 200 is up 2.5 per cent for the month despite yesterday’s 0.7 per cent setback.
So the playbook for the day appears something such as this: positive leads for miners, oilers and importers ; negative leads for other exporters and businesses that create significant revenue in US dollars. The latter include Macquarie Group, News Corp, Brambles, Amcor, Ansell, Appen, Altium, Aristocrat, James Hardie, ResMed, Cochlear, and CSL .
Commodities
Barring news which is bad from Tropical Cyclone Damien, iron ore majors BHP, Fortescue as well as rio Tinto appear set for fresh multi year/record highs. BHP’s US-listed stock put on 2.78 per cent and its UK listed inventory 3.17 per cent. Rio Tinto rose 2.22 per cent in the US and 2.91 per cent in the UK.
Iron ore rose for a 12th straight session. The purchase price has now gone parabolic and looks vulnerable if Tropical Storm Damien passes without incident.
“The market place is within disequilibrium at this time – investors are actually trading manufacturing metals like iron ore as a speculative play on exactly how China’s economy will perform,” Atilla Widnell of Navigate Commodities told Bloomberg. “There isn’t any way iron ore might be for US$150 based on demand and supply fundamentals.”
Gold dipped for a second day in front of what’s likely to become a green light from the US regulator for Pfizer’s Covid-19 vaccine. Gold for February delivery settled $1.10 or even less than 0.1 per cent weaker at US$1,837.40 an ounce. The NYSE Arca Gold Bugs Index edged up 0.32 a cent.
“Vaccine information is bearish for gold,” Chintan Karnani, chief market analyst at Insignia Consultants, told MarketWatch.
Copper and nickel set the pace during a good night for industrial metals on the London Metal Exchange. Benchmark copper rose two per cent to U$7,860.75 tonne. Nickel gained 4.4 per cent, aluminium 1.3 per cent, zinc 0.3 per cent as well as tin 0.2 per cent. Lead shed 1 per cent.
