The ASX futures market is six points higher and today is looking for a flat open, as profit taking in international markets overnight raise questions about whether the Trump rally is over.
Markets in the waiting place
1. Rally over? In overnight markets we saw some early profit taking in some sectors, and questions are now being asked if the Trump rally is over? Probably not, as Michigan certifies Trump the winner three weeks after the election, making Trump the first Republican to win Michigan since 1988.
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2. Spending: Trump has suggested the Euro area lift defence spending to 2 per cent of GDP, the only counties short of this target are Italy Spain and Portugal whose Debt to GDP ratio's still exceed 100%. While the US spends a whopping 45% of GDP on defence.
The Trump rally will now depend on economic numbers coming through; the Dallas manufacturing Index came in at 10.2 against 2.0 as expected. This week's non-farm payroll number will also have a greater influence in the current market rally.
3. Currencies: The most crowed trades in the FX markets are USDJPY (112.25) and EURUSD (1.0597) and both saw early profit taking but remain off the session lows. An important level held in the USD Index after trading as high as 102.02 still remains positive over the key 100 level at 101.35.
Both markets saw losses in the early part of the session only to regain some of the lost ground later in the close, this suggests the trade is not over, but the markets certainly have reached an inflection point and now enter the waiting game on political and economic outcomes.
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4. Politics: Politics in Italy and France will bring in some uncertainty in the short term. OPEC is still trying to tie the knot with a capped oil production deal between members nations and non-members. Oil remains steady with Brent holding $48.00bl.
5. Equities: US markets posted moderate falls with the Dow down 40 points in closing trade. Most sectors saw price weakness early in the session with the Russell 2000 the best performing index also slightly lower to 1334 points. To make the risk off picture complete, the utilities sectors saw modest gains into the close. I would expect this to flow through to the Australian sectors today TLS, SYD airports and Transurban.
6. Local market: Gold regained some composure looking to retest $1200oz, from recent lows of $1176oz, and we will see this play out in the Australian Gold sector today with the AUD-Gold price ticking back over $1600 oz. The resource sector in the Australian market continues to see M&A; with Yancoal taking some assets from RIO. BHP's overnight ADR has the stock at $25.72 down from yesterdays close of $25.81 with CBA ADR at $77.16 down 13 cents from yesterday. The ASX Futures market is 6 points higher and today is looking for a flat open at 5470 points.
7. Today's diary:
- Local data: Weekly ANZ-Roy Morgan Consumer Confidence Survey
- Overseas data: Japan October jobless rate, retail sales; Euro confidence surveys; UK credit, consumer-business confidence; US revised Q3 GDP and S&P;/CoreLogic house prices and consumer confidence.
8. Market highlights:
- SPI futures up 4 points or 0.1% to 5476
- AUD +0.6% to 74.78 US cents
- On Wall St, Dow -0.2%, S&P; 500 -0.3%, Nasdaq -0.4%
- In New York, BHP -0.8%, Rio +0.4%
- In Europe, Stoxx 50 -1%, FTSE -0.6%, CAC -0.9%, DAX -1.1%
- Spot gold +0.8% to $US1192.47 an ounce
- Brent crude +1.8% to $US48.11 a barrel
- Iron ore +1.5% to $US80.83 a tonne
- LME aluminium -0.6% to $US1747 a tonne
- LME copper flat at $US5880 a tonne
- 10-year bond yields: US 2.33%, Germany 0.20%, Australia 2.69%
This column was produced in commercial partnership
between Fairfax Media and IG.