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OVERNIGHT MARKET SNAPSHOT (as at 8:20am AEDT)
- SPI200 (Dec) overnight futures up 29 pts to 6732
- SP500 up 26.93 pts to 3168.56
- NASDAQ up 63.27 pts to 8717.32
- Dow Jones up 220.75 pts to 28,132.05
- FTSE100 up 57.22 pts to 7273.47
- DAX30 up 74.90 pts to 13,221.64
- GOLD futures US Session (Feb Contract) down $0.90 to $1474.10 an ounce
- COPPER futures US Session (Comex Mar) up $0.020 to $2.809 a pound
- OIL futures US Session (Nymex Jan) up $0.54 to $59.30 a barrel
- CRB Index up 1.42 pts to 182.92
- AUDUSD trading at 0.6905
- EURUSD trading at 1.1126
- GBPUSD trading at 1.3163
- USDJPY trading at 109.3100
- USD Index US Session (ICE Dec) up 0.247 to 97.303
The US share market surged higher on the open of trade as the US and China come to trade deal in principle. The US and China have come to an agreement for a phase 1 trade deal that is expected to include the cancellation of the next round of tariffs and cuts to existing tariffs of up to half in return for guaranteed purchases of US agricultural goods. Also on the cards for the phase 1 deal is China’s commitment to protect intellectual property and open the Chinese market for financial services. The Deal still requires Trump to sign off which is expected to be done later today. The DOW closed up 0.11% while the broader SP500 was up 0.29% and the Nasdaq ended up 0.44%. In Europe, Indexes were buoyed by comments from the ECB and news on trade. The ECB kept its sub-zero interest rate steady with new president Lagarde poised to help take the Eurozone out of negative interest rates. The UK is still awaiting the outcome of the elections to see whether Boris can gain the majority he needs to push through his Brexit agenda.
The US Repo market remains a cause for concern and may be set to be squeezed again as the year comes to a close. The available cash for borrowers to pay corporate taxes etc may be strained leading to a potential spike in the interest rates on the repos. In September, interest rates spiked to 10% for some overnight Repo loans. The New York Fed will increase its lending to overnight markets at a time when large banks are expected to reduce their lending in an effort to shrink their balance sheets and avoid higher capital surcharges.
The USD found buying support to spike up off recent lows around the open of the US session. Sellers later reversed the gains on the dollar to give back a lot of the move into the close. We expect to see the Dollar supported as a trade deal would lead to a lift in economic growth through manufacturing and potentially upward pressure on interest rates down the track. The EURO came under pressure as the dollar rallied on trade news and offset positive comments from the ECB. Buyers managed to make back the losses to push price up off the lows into the close. The GBP volatility spiked as price saw wild swings as traders braced for election outcomes. The Pound dropped as polls suggested that Boris may not have his majority needed for Brexit to get done and trigger a ramp up in business investment. Expect to see further wild swings into the final result depending on the magnitude of the majority. In the event that the current ruling Conservatives do not get their majority, the UK may head to another referendum which could reverse the decision to leave the EU. The AUD continued to push higher on the back of trade news as price tests the 0.6925 resistance zone. It seems that the recent rally was traders front running the positive news on trade and the phase 1 deal. The USDJPY pushed up hard off support as the USD rallied and safe haven YEN buyers disappeared.
Gold nosedived as the US session got up and running with the appeal of a safe haven diminishing on trade deal hopes. Going into the US open, price squeezed sellers with a spike and flush out of previous highs before reversing and heading lower. Crude Oil got a lift from the trade news and looks set to edge its way higher on an expected lift in demand and OPEC production cuts. Copper also found support from buyers to push price up through highs to continue with the positive momentum from the previous sessions.
Cryptocurrencies hold their ground with some mixed results across the board. Bitcoin is currently trading at $7204.9 down 0.15% while Ethereum is at $145.31 up 1.42% and Ripple is trading at $0.22077 down 0.08%.
The ASX200 had a rough session yesterday as sellers came in from the open and pushed the index lower into the close where it finished at 6708.8 down 43.8 points. The Telecom Services sector and Info tech were the hardest hit followed by Financials while the Gold sector found some buying even as Aussie Gold moved lower. Falling stocks outnumbered advancing ones by 649 to 444 and 346 ended unchanged. The ASX is expected to be supported by trade news today and buyers to step up the pressure and reverses losses from yesterday.
The ASX200 is expected to open up 30 points after the SPI200 followed US Indexes higher on the back of a phase 1 trade deal.
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ECONOMIC DATA OUT TODAY (AEDT)
JPY Tankan Manufacturing and Non-Manufacturing Index 10:50am
JPY Revised Industrial Production 3:30pm
GBP Consumer Inflation Expectations 8:30pm
USD Retail Sales Data and Import Prices 12:30am
USD FOMC Member Williams Speaks 3am
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SPI200 INTRADAY LEVELS TO WATCH
