Global Markets Overview – December 12, 2014
A round of positive US economic data seems to have reinvigorated the greenback, with retail sales and unemployment claims both coming in ahead of estimates.
Jobless claims fell to 294,000 (versus expectations of 297,000) and retail sales advanced 0.7% (versus 0.4% expected). Equities rallied in response, with retailers leading the way. All of a sudden, it seems the declining oil prices are starting to turn into a positive for the economy and everyone is ignoring the turmoil in the energy space.
The USD regained some ground against most of its global peers and the commodity currencies took the biggest hit. Japan is likely to outperform Asia, given the recovery in USD/JPY (¥119.00) after a sharp slide recently.
The Nikkei is pointing up 0.7% at the open as we head into the election weekend. Abe is expected to win a majority and press on with his economic policies.
China data to drive risk
AUD/USD had shown some positive signs in the aftermath of yesterday's somewhat deceiving jobs numbers. The pair actually popped back above $0.8300 but the strength was short-lived as investors realised the majority of jobs were part time.
Yesterday's jobs report was mixed at best and, due to the volatility in part-time hiring, the report is actually skewed negatively. There is also a risk we'll see some revisions at some stage, as we've gotten accustomed to in recent times.
AUD/USD has now printed a fresh low since July 2010 of $0.8215 and will be back in focus today with a raft of releases out of China. On the docket todaywe have Chinese fixed assets, retail sales and industrial production. After the benign inflation reading earlier in the week, I wouldn't be surprised to see activity in retail and industrial production fall short. This could be a source of further weakness for the AUD.
While the RBA remains concerned about a strong Aussie dollar, Governor Glenn Stevens has suggested the cost of money is not the problem for Australia. This might temporarily cool some of the rate cut calls and it'll also be interesting to see what this means for the fiscal policy side of things, incase the government is hoping the RBA will bail it out.
Resources to remain under pressure
Ahead of the local market open we are calling the ASX 200 relatively flat at 5227. Commodities were mostly weaker but iron ore managed a minor recovery. Even though iron ore recovered a touch, this will have limited impact on iron ore plays as the price remains below $70/t - this is naturally a worry for the majority of iron ore miners and means the investment case remains quite benign.
It's also interesting to see BHP shifting its focus for new projects from iron ore to copper. This will be a concern for the pure plays. Energy plays are likely to remain under pressure, with no positive signs at all in crude oil prices. Uranium might be an interesting space to watch, given all the uranium deals Australia has been signing. NAB is reported to be in talks to sell its UK loan book, while WBC has its AGM in Brisbane.
Asian markets opening call | Price at 8:00am AEDT | Change from the Offical market close | Percentage Change |
Australia 200 cash (ASX 200) | 5,205.60 | -25 | -0.48% |
Japan 225 (Nikkei) | 17,245.00 | -12 | -0.07% |
Hong Kong HS 50 cash (Hang Seng) | 23,112.10 | -200 | -0.86% |
China H-shares cash | 11,189.90 | -66 | -0.58% |
Singapore Blue Chip cash (MSCI Singapore) | 375.73 | -1 | -0.22% |
US and Europe Market Calls | Price at 8:00am AEDT | Change Since Australian Market Close | Percentage Change |
WALL STREET (cash) (Dow) | 17,523.00 | -53 | -0.30% |
US 500 (cash) (S&P) | 2,025.54 | -6 | -0.29% |
UK FTSE (cash) | 6,387.50 | -97 | -1.48% |
German DAX (cash) | 9,766.40 | -3 | -0.03% |
Futures Markets | Price at 8:00am AEDT | Change Since Australian Market Close | Percentage Change |
Dow Jones Futures (December) | 17,528.50 | -54.00 | -0.31% |
S&P Futures (December) | 2,025.63 | -5.75 | -0.28% |
ASX SPI Futures (December) | 5,360.50 | 0.00 | 0.00% |
NKY 225 Futures (December) | 17,220.00 | -52.50 | -0.30% |
Key inputs for the upcoming Australian trading session (Change are from 16:00 AEDT) | Price at 8:00am AEDT | Change Since Australian Market Close | Percentage Change |
AUD/USD | $0.8276 | -0.0047 | -0.54% |
USD/JPY | ¥118.710 | 0.425 | 0.36% |
Rio Tinto Plc (London) | £27.60 | -0.38 | -1.34% |
BHP Billiton Plc (London) | £14.15 | 0.29 | 2.06% |
BHP Billiton Ltd. ADR (US) (AUD) | $28.46 | -0.59 | -2.05% |
Gold (spot) | $1,227.75 | -0.86 | -0.07% |
Brent Crude (January) | $63.29 | -1.49 | -2.29% |
Aluminium (London) | 1945 | -16.75 | -0.85% |
Copper (London) | 6453 | 36.00 | 0.56% |
Nickel (London) | 16223 | -127.00 | -0.78% |
Zinc (London) | 2187.5 | 3.50 | 0.16% |
Iron Ore (62%Fe Qingdao) | $69.37 | 0.23 | 0.33% |
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