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By Gary Burton
It's a good day to be a commodities bull with strong gains in overnight markets, setting the stage for a strong open on the local sharemarket.
Commodities bull run
1. Commodities: Following China's CPI year on year print landing at 5.5% the commodities markets came alive with solid gains in Nickel, higher by 2% and Copper higher by 3%.
2. Oil: With news the US energy agency suggesting US oil production will rise by 300,000 barrels per day into 2018 brought some pressure onto the overnight oil price, at this will flow thru to the Oilers in Australia today.
3. China and US: The growing expectation has now firmed, China and the US will lead the world to inflation and economic growth in the next 5 years. Add to the mix the US small business index rose 7.4 points the most since 1980 to stand at 105.8.
A strong start is in store for the ASX. Credit: Rob Homer
4. Trump countdown: With the countdown to Trump's inauguration, these types of numbers would provide a very compelling case for strong US growth in the first term. US corporate reporting season only days away the markets will be focused not only on companies revenue but forward commentary and expectations in a rising interest rate and inflationary environment.
5. Race to 20,000: Typically markets remain subdued during the first term of a new president, 2017 may be the exception to the rule.
If there is one thing holding the DOW back from crossing 20,000 points this earnings season will provide the catalyst to make a run to 21,000 or see a decline back to test the technical breakout at 19,000.
6. Currencies: Currencies are entering trading ranges with the USDJPY moving below the 116 handle, this will provide some weakness to the Nikkei 225 in todays session.
The AUD expected to range trade between .7150 and 7400 in its current longer term primary downtrend from 2011 highs.
Not unexpected the USD Index remains strong above the key 100 level at 102.2.
6. ASX: For Australia today its about overnight gains in Iron ore, BHP's ADR suggests an open 3.1% higher FMG ADR shows a 2.1% move to $6.05.With the four banks testing individual price resistance levels the spotlight will be back on resources today.
7. What's on today: Local data: Job vacancies November, NZ house prices December
Overseas data: UK trade balance November
8. Market watch:
SPI futures rose 33 points or 0.6% to 5749
AUD +0.1% at 73.63 US cents (overnight range: 73.31 to 73.85)
On Wall St, Dow +0.2%, S&P 500 +0.4%, Nasdaq +0.5%
In New York, Rio +6%, BHP +4.7%
In Europe, Stoxx 50 flat, FTSE +0.5%, CAC flat, DAX +0.2%
In London, Rio +6.4%, BHP +4.4%
Spot gold +0.2% to $US1183.63 an ounce
Brent crude -1.1% to $US54.32 a barrel
Iron ore +2.2% to $US79.43 a tonne
LME aluminium +1.3% to $US1749 a tonne
LME copper +3% to $US5760 a tonne
10-year bond yield: US 2.38%; Germany 0.28%; Australia 2.71%
This column was produced in commercial partnership
between Fairfax Media and IG Markets