Global Markets Overview - Nov. 2, 2015

The Cup is not the only thing to watch this week

The Melbourne Cup might have the international raiders as the ones to watch, but on the data front Australia is one to watch.

At the back end of last week, several major crux points ‘settled’ – meaning Australia is now one of the last markets/economies to give direction.

These events include:

• The lingering issues of the US debt ceiling looks to be 2017’s issue (well past the 2016 US Presidential election) as Paul Ryan and co present a bill that the President is likely to sign within the next 48 hours which sees it being pushed out to mid-2017.
• Friday night saw the US logging have its best month in four months.
• OPEC is clearly trying to ‘normalise’ the oil price with output from the group falling to 120,000 barrels per day in October – well down on the September month.
• China’s fifth plenum has now concluded and besides the headline grabbing one-child policy ending, its GDP expectations over the next five years are to be set at ‘medium to high levels of growth’.
• The Fed fund futures have repriced again to see a 50/50 chance of a rate hike at the 16-17 December Fed meeting. USD premium is very likely this month.
• The Bank of Japan (BoJ) held firm on its current path, however the market’s reaction as the press conference began is that the BoJ will still have to move before the year is out.

Melbourne Cup rate decision

• Only 12 out of 29 economists expect a 25 basis point (bps) cut tomorrow . Of the 12 economists calling for the cut, seven of them moved on the back of the banks’ moving rates ‘out-of-cyclical’.
• The interbank market is pricing in a 40.1% chance of a cut on Cup day, but is pricing a 73% chance of a cut on 1 December .
• The Reserve Bank of Australia’s (RBA) monthly statement on Friday is key to December expectations. It will have an update on several factors including inflation and growth forecasts. Expectations are for 2016 and 2017 forecasts to be lowered which would clear the way for cuts in 2016 if the board doesn’t move in the next five weeks (ie not in 2015).
• The trade balance on Wednesday is the next interesting piece of data from an equity perspective. Copper, oil, iron ore and coal did not recover in October yet firms with exposure to these commodities had a major bounce throughout October. The trade deficit has hovered around record levels for the past three months and may tip to a record deficit on Wednesday .
• Glenn Stevens is addressing the Melbourne Institute on Thursday on the topic of Economic and Social Outlook. This is likely to give him a platform to outlay what he sees for the remainder of 2015. He could outline the possible changes to the monthly statement on Friday and even possibly position the market for monetary policy changes in 2016. This is not his normal modus operandi but it will be a speech that the market will have to watch.

So it’s a big week in Aussie data, which may mean you’ll need one eye on the race track and the other on your screens.

Ahead of the Australian Open

The ASX is looking to be fairly flat on the open, we see the market down a handful of points to 5239. The Australian building approvals figure coupled with the final Caixin manufacturing PMI read are the data point on the radar while Westpac releases its audit numbers for the full year this morning. On first blush, all audited figures have married up to the pre-released unaudited figures. However, bad and doubtful debts are up over 16% and costs have also expanded – the result looks mixed.

Asian markets opening call

Price at 8:00am AEDT

Change from the Offical market close

Percentage Change

Australia 200 cash (ASX 200)

5,238.90

-1

-0.01%

Japan 225 (Nikkei)

18,803.60

-280

-1.46%

Hong Kong HS 50 cash (Hang Seng)

22,594.90

-45

-0.20%

China H-shares cash

10,382.60

-14

-0.13%

Singapore Blue Chip cash (MSCI Singapore)

334.05

-2

-0.67%

US and Europe Market Calls

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

WALL STREET (cash) (Dow)

17,680.00

-154

-0.87%

US 500 (cash) (S&P)

2,080.04

-18

-0.92%

UK FTSE (cash)

6,341.80

-70

-1.07%

German DAX (cash)

10,823.00

-23

-0.21%

Futures Markets

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

Dow Jones Futures (December)

17,932.50

-27.50

-0.15%

S&P Futures (December)

2,073.63

-13.38

-0.64%

ASX SPI Futures (December)

5,208.00

-21.00

-0.41%

NKY 225 Futures (December)

18,977.50

62.50

0.33%

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

$0.7119

0.0016

0.23%

USD/JPY

¥120.425

-0.730

-0.60%

Rio Tinto Plc (London)

£23.59

0.01

0.04%

BHP Billiton Plc (London)

£10.41

-0.13

-1.19%

BHP Billiton Ltd. ADR (US) (AUD)

$23.13

0.34

1.49%

Gold (spot)

$1,142.38

-5.90

-0.51%

Brent Crude (December)

$49.56

0.89

1.83%

Aluminium (London)

$1,447.25

7.50

0.52%

Copper (London)

$5,142.50

13.00

0.25%

Nickel (London)

$10,046.00

-318.00

-3.07%

Zinc (London)

$1,689.00

1.75

0.10%

Iron Ore (62%Fe Qingdao)

49.5

0.00

0.00%

IG Iron Ore (CNH)

¥346.75

1.35

0.39%

IG provides round-the-clock CFD trading on currencies, indices and commodities. The levels quoted in this email are the latest tradeable price for each market. The net change for each market is referenced from the corresponding tradeable level at yesterday’s close of the ASX. These levels are specifically tailored for the Australian trader and take into account the 24hr nature of global markets.

Please contact IG if you require market commentary or the latest dealing price.

EVAN LUCAS
Market Strategist