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8@eight: The market punts on a Clinton victory

The local share market is set to rise amid a global equities rally on bets Hillary Clinton will win the US presidential election. Local mining shares traded strongly overnight and look set to be strong performers today. 

Global markets on fire ahead of the vote

1. Election: The market is telling you they feel Clinton has the election in her sights and judging by the strong moves in healthcare (globally) the view is we see the Democrats winning back the Senate and the Republicans retaining the House, although the race for the Senate in actuality is a 50/50 proposition.

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Will markets get the clarity they crave?

Traders and investors have de-risked portfolios and chased the safety of gold and the JPY, but will Wednesday’s US election provide the answers traders desperately need?

The S&P; 500 has rallied 2%, with good gains in healthcare, tech and financials and volumes are in-line with the 30-day average.

2. Asia: These leads provide a great read through for Asia, although much of the gains in US equities have been priced into Asian stocks. In US trade materials stocks have largely underperformed, but then again they have down comparatively better performers of late. Still, the commodity story is one that we simply have to look at in a positive light, and while it is not a new story the ferocity behind the buying is like a standing in front of a freight train and will do wonders for Australia's trade deficit if prices can hold current levels. Overnight we saw copper +2.2% and gaining for an incredible eleventh day. Spot iron ore has gained 3.7%, with futures +2.9%. Steel and coking coal futures have gained 3.8% and 4.2% respectively and remain the poster boy of all things speculation in China. There must a be a real fear of missing out (FOMO) underway in the Chinese trading community and we even saw egg futures (traded on the Dalian exchange) gain 3.5%!

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 Photo: Peter Braig

3. Miners: BHP should open around 1.3% higher, but it's the mid- and smaller-cap names that are on fire here. Take a look at the daily chart of SGM (Sims Metal Management), it looks like a thing of beauty right now. Names like OZL (Oz Mineral) and SFR (Sandfire) also are breaking out and looking like a trend and momentum traders dream right now. Put these stocks on the radar, it seems this is the place to go hunting in the Aussie stock market, despite already having a run.

4. Shares: The ASX 200 enjoyed a 1.4% rally yesterday and SPI futures are up a more modest 12 points from the 17:00 overnight re-set. Whether traders fade todays open or carry on buying in earnest is my question of the day, and if I had to make an assumption it would be that further upside prevails. The lead's just so bullish (but baked in to a degree), but are all the gains coming from a position adjustment (short covering) or are we seeing genuine buying? The S&P; 500 has rallied back above 2116 (a key resistance level), the US volatility index has lost 17% and there is still far more hedging to unwind and emerging market assets are flying, with the EEM ETF (iShares Emerging market ETF) having its best day since March (+3.5%).

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Traders are focused on the outcome of the US Electoral College vote and while various estimates have been thrown around they all have Clinton wining, with anywhere between 274 to 322 seats (the victor needs 270). If Clinton takes Florida then its goodnight Vienna for Trump and campaign over, and from what I can see Clinton is getting the edge here and the potential 29 College votes Florida provides. North Carolina is also a toss-up too, with Clinton seemingly pulling ahead in Nevada and New Hampshire. Trump seems to have picked up steam in Ohio and Missouri.

5. Aussie dollar: The AUD has also benefited from moves in metals and bulks and AUD/USD is right in the $0.7700 to $0.7750 sell zone. A break of $0.7750 would take the pair into the April high of $0.7835 and from there a test of $0.8000. All well and good if our terms of trade are going berserk like they are. The bigger moves have been seen against the JPY, with AUD/JPY breaking above the 2015 downtrend. Stay long this pair for now and I would be trailing stops below ¥79.27.

6. Data: In terms of event risk I suspect todays NAB business confidence print at 11:30 aedt will do little to alter market sentiment (regardless of the actual print). The same could be said for China's October trade data (no set time), where the surplus is expected to increase to $51.7 billion, with exports expected to fall 6% and imports drop 1%. Late yesterday we saw China's October FX reserves fall $46 billion to $3.12 trillion, but while many will talk about sizeable capital outflows from China and the potential headwind to growth, be not alarmed as this was a result of valuation and changes in their holdings of its reserves, as opposed to pure capital leaving China. 

7. Today's diary: 

  • Local data: NAB business survey Oct, ANZ Roy Morgan consumer confidence weekly
  • Companies: Commonwealth Bank first quarter update, Incitec Pivot full year results, DuluxGroup full year results, Newcrest Mining AGM, REA Group AGM 

8. Market highlights: 

  • SPI futures up 7 points or 0.1% to 5247 at 7.40am Sydney time
  • AUD +0.6% to 77.15 US cents
  • On Wall St, in late trade, Dow +1.8%, S&P; 500 +2%, Nasdaq +2.1%
  • In New York, BHP +4.5%, Rio +3.7%
  • In Europe, Stoxx 50 +1.9%, FTSE +1.7%, CAC +1.9%, DAX +1.9%
  • In London, BHP +4.8%, Rio +3.6%
  • Spot gold -2% to $US1279.59 an ounce
  • Brent crude +1.1% to $US46.09 a barrel
  • Iron ore +3.7% to $US67.43 a tonne
  • LME aluminium flat at $US1721.50 a tonne

Description  This column was produced in commercial partnership
   between Fairfax Media and IG Markets

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