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 along with a modest drop on Wall Street.
ASX SPI200 index futures fell thirty six points or 0.5 per cent. US stocks finished mixed. Iron ore soared five per cent to a fresh multi year high. Crude oil cracked US$fifty a barrel for the first time since March. The dollar climbed to its highest level since June 2018.
Wall Street
US stocks struggled as a result of the opening bell amid mixed signals on stimulus talks. A jump of claims for jobless benefits underlined strains on the economy. The S&P 500 pared first losses to finish five points or maybe 0.13 per dollar of the red.
The Dow Jones Industrial Average traded either side of 30,000 for most of the session prior to doing 70 points or maybe 0.23 per dollar weaker at 29,999. Strength in’ stay at home’ stocks lifted the Nasdaq Composite 67 points or maybe 0.54 per cent.
Hopes for a stimulus deal waxed as well as waned. Treasury Secretary Steven Mnuchin stated talks had made “a plenty of progress”. Democrat House Speaker Nancy Pelosi agreed there had been “great progress”. Still 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 hold back until next year.
“If we do not get stimulus by the conclusion of the season, you could certainly 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 since October. The total was much worse as opposed to the 730,000 expected by economists polled by Dow Jones.
“Given the latest behaviour of initial statements, we will likely see even more increases in ongoing claims going forward,” Thomas Simons, cash market economist at Jefferies, wrote. “Evidence has been building indicating that claims arrive at an inflection point in early November due to rising COVID case numbers and forced the imposition of social distancing policies that really damage the service segment of the economy.”
Australian outlook
A true mixed bag for localized investors this early morning. Plenty of plenty as well as positives plenty of negatives. Looks like a sharp split forward between losers and winners.
To begin with, the positives. Iron ore soared $7.50 or even 5 per cent to US$158.25 a tonne, an eight year peak, as reported by CommSec. Brent crude settled $1.39 or perhaps 2.8 per dollar higher at US$50.25 a barrel, its first close above US$fifty since the early days of the pandemic market plunge.
Energy stocks outperformed in the US, rising 2.9 a cent. Financials as well as tech stocks also rose, 2 more pluses for the industry of ours. Wall Street finished well off its low – another plus.
Now to the downsides. Those stellar benefits in commodity prices fed directly into the dollar. The Aussie surged 1.2 per cent to 75.35 US cents. The area currency is traded by many forex players as a classic commodity proxy.
Some other negatives? The increase in iron ore was brought on by a cyclone from the Pilbara coast. Any damage or even stoppages at local producers would dent share rates. Wall Street finished broadly lower. Oddly, the US materials sector fell 0.7 per cent. 7 straight gains has left the ASX looking vulnerable to further profit taking. The S&P/ASX 200 is actually up 2.5 per dollar for the month despite yesterday’s 0.7 per cent setback.
So the playbook for the day looks something like this: good leads for miners, oilers and importers ; damaging leads for various exporters and businesses that create considerable 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 bad news from Tropical Cyclone Damien, iron ore majors BHP, rio Tinto as well as Fortescue look set for fresh multi year/record highs. BHP’s US listed stock placed 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 cost has now gone parabolic and looks vulnerable if Tropical Storm Damien passes with no incident.
“The market place is in disequilibrium right this moment – investors are actually trading industrial metals as iron ore as a speculative play on how China’s economy is going to perform,” Atilla Widnell of Navigate Commodities told Bloomberg. “There isn’t a way iron ore can easily be for US$150 based on need and supply fundamentals.”
Gold dipped for a second day ahead of what’s expected to become a green light from the US regulator for Pfizer’s Covid-19 vaccine. Gold for February delivery settled $1.10 or perhaps under 0.1 per cent weaker at US$1,837.40 an ounce. The NYSE Arca Gold Bugs Index edged up 0.32 per cent.
“Vaccine info is actually bearish for gold,” Chintan Karnani, chief industry analyst at Insignia Consultants, told MarketWatch.
Copper as well as nickel set the pace during a solid night for manufacturing metals on the London Metal Exchange. Benchmark copper rose 2 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 a cent. Lead shed 1 per cent.
