Originally published by AxiTrader
Quick Recap
Markets, with the exception of Crude Oil, were largely unfazed with the news that broke Friday of the FBI re-investigation into Hillary Clinton's emails while she was Secretary of State. While it hasn't moved the needle on market sentiment it does seem like Trump is having a resurgence in the polls. Fox reported yesterday he is leading - by a handsome margin - in Florida which is a key state he needs to win.
But markets are betting on a Hillary Clinton, which is of course a massive risk if we get a surprise. We saw the impact that can have with the Brexit vote. But for the moment traders see a benign outcome and overnight stocks were fairly quiet, bonds hardly moved and the US Dollar regained a little of its mojo.
Not so for oil traders however with a combination of worries a deal won't get done and a Reuters survey showing production went up last month. Yes, not a typo up.
What You Need To Know
International
- Markets stabilised overnight and even though most of Asia and Europe’s stock markets finished in the red there was no material follow through for concerns that emerged Friday night about the potential impact on the presidential election on November 8.
- So US stocks are largely unchanged, bonds are largely stable, and the US dollar has regained some of the lost ground from Friday.
- On the data front - US core PCE prices printed 0.1% in September as expected but the yoy was a little higher than forecast at 1.7% due to revisions. Non core printed 0.2% and 1.2% respectively while personal income was up 0.3% and personal spending 0.5% for the month of September.
- The Chicago PMI was much weaker than expected at 50.6 with pundits guesstimates at 54 after last months print of 54.2. But the Dallas Fed index manufacturing index printed -1.5 from last months -3.7 in October.
- German retail sales were very weak falling 1.4% against the expectation of a 0.2% rise after last month’s 0.3% dip. It seen the Yoy number collapse to just 0.4% growth which casts a very different picture on the German economy – at least at the consumer level – than we’ve been seeing lately. EU GDP for Q3 came in at +0.3%, on the money, which took yoy numbers to 1.6%.
- Teresa May said she supports Mark Carney to remain as BoE governor.
Australia
- The S&P/ASX 200 managed to again defy global moves yesterday gaining 34 points, 0.65%, to finish back at 5317. That looked like a natural bit of bargain hunting after the collapse of last week but overnight SPI traders have the December contract largely unchanged giving us no real lead. On the SPI it tried to break back inside the uptrend it broke out of yesterday but couldn’t do it overnight. That level is just 5 points away though so if the ASX can rally again today the buyers might leap back into the fray.
- The release of the MI monthly inflation gauge yesterday and the print of just a 0.2% rise in prices was a big dip from the previous months 0.4%. Private sector credit data showed appetite for debt moderate a little in yoy terms to just 5.8% per annum…we are getting closer to nominal GDP growth.
- Today all eyes are on the RBA announcement at 2.30pm. The market is not pricing for a move although around a quarter of the economists polled by Bloomy last week have a cut pencilled in. That said the confidence they have displayed in their notes to clients appears low from what I have read.
- So a cut would be a shock - but on Melbourne cup day a few traders might take a flutter on such an outcome.
- What I’ll be looking for is what the RBA says about inflation, employment, and housing to see whether the door is being slammed shut on more cuts or not. At 1.5% rates are still very low and continue to provide stimulus. SO my sense is no move but the door ajar should the economy need it if the jobs market slowdown takes hold.
Forex
- Friday’s moves were already reversing in Asia yesterday with the US dollar recovering from it’s post FBI email revelation funk from about the time Tokyo traders put their feet under the desk to start the week. In pure technical terms the US Dollar Index has found support at my fast moving average which is fairly normal – but unless it takes out last week’s highs it looks like lower levels beckon on the charts.
- Looking specifically at prices there has not been any material moves. The pound is a little higher at 1.2227, Euro is at 1.0973, USD/JPY is at 104.84 and the USD/CAD is at 1.34 as oil slips.
- For the Australian dollar today we start above 76 cents as trader eye the RBA and after the buyers came back in yesterday. Friday’s bounce off trendline support from the lows of 2016 certainly helped the Aussie. But overall we remain mired in the range. What governor Lowe says this after noon will be important as will the raft of PMI data kicking off around the region today.
Commodities
- Oil has been smashed overnight and is down 3.98% in Crude Oil terms to $46.76 while Brent Oil is off around3% also at $48.17 a barrel. Traders are still clearly worried about whether OPEC can get a deal down and a Reuters survey showing production ramped up another 130,000 barrels per day highlights some producers upped their run rate in anticipation of the cuts to come.
- As I wrote yesterday I still think a deal gets agreed and from a behavioural sense the fact production was ramped suggests so do OPEC members – they are posturing for position. Interestingly Reuters also reports that OPEC last night approved a long term strategy for the group. This is important because it is understood to be formally more supportive of cutting production to support prices. And it appears it has now, unopfficially, been approved by OPEC’s board of governors – at least that’s what 4 sources have told Reuters.
- Which all means I’ll be watching trendline support closely. This morning’s prices are already below my initial target of $47.50 and the trendline support comes in around the $46 level I discussed in my morning video yesterday. Here’s the chart.
- Gold is largely unmoved this morning ar $1273 but Copper has shot higher once more and is approaching overhead resistance as prices get squeezed after a long period of copper’s underperformance to the overall commodity market rally. Here's copper:
Today's key data and events (all times AEDT)
- Australia - AiG Performance of Mfg Index (Oct) (9.30am); RBA Interest Rate Decision, RBA Rate Statement (2.30pm); RBA Commodity Index SDR (YoY) (Oct) (4.30pm)
- New Zealand - Nil
- China - Non-manufacturing PMI (Oct), NBS Manufacturing PMI (Oct) (12pm); Caixin Manufacturing PMI (Oct) (12.45pm)
- Japan - BoJ Press Conference (n/a); BoJ Interest Rate Decision, BoJ Monetary Policy Statement (2pm); Vehicle Sales (YoY) (Oct), BoJ outlook report (4pm)
- Germany - Nil
- EU - Nil
- UK - Markit Manufacturing PMI (Oct) (8.30pm)
- Canada - Gross Domestic Product (MoM) (Aug) (11.30pm); RBC Manufacturing PMI (Oct) (12.30am)
- US - Redbook index (YoY) (Oct 28), Redbook index (MoM) (Oct 28) (11.55pm); IBD/TIPP Economic Optimism (MoM) (Nov), ISM Prices Paid (Oct) (1am); Markit Manufacturing PMI (Oct) (1.45am); ISM Manufacturing PMI (Oct), Construction Spending (MoM) (Sep) (2am); 4-Week Bill Auction (2.30am); Total Vehicle Sales (Sep) (n/a); API Weekly Crude Oil Stock (7.30am)
Have a great day's trading