Originally published by Rivkin Securities
The ASX 200 rose 0.48% yesterday despite the US market closing relatively unchanged on Friday. The ASX 200 is not far off an eight-year high; a close above 6,000 would be the highest close since the 2008 financial crisis. We would require a further 4-5% rally to get there from here.
The US market was closed overnight due to Martin Luther King day so commodity markets were relatively quiet. Gold has maintained its upward trend that started in mid-December. The rally seems to be related to the fact that the market has realised it was a little too optimistic about the potential benefits of president-elect Trump’s proposed policies. In fact, the IMF warned in its latest economic outlook that the uncertainty about Trump’s policies could expose the economy to significant risks. One of these risks particularly relevant to Australia is China’s rapidly rising debt and capital outflow. As a major trading partner of Australia, our economy hinges closely on China’s economic performance. The IMF is urging the US to implement long term productivity reforms rather than a short-term stimulus plan.
The Crude Oil price is continuing to hold above $50 per barrel where it appears to be consolidating. Although there are still fluctuations based around headlines out of OPEC, the price has remained in a relatively narrow $2-$3 range for at least the last month. In the coming months, oil traders will be looking to see inventories start to decline as a result of the reduced supply because of the OPEC deal to cut production. Australian fuel prices have risen sharply over the last couple of weeks, partly because of the increases in oil prices.
Very little economic data was out last night but we will get the Australian employment report on Thursday. This will be closely scrutinised by the RBA and will influence future interest rate policy. Also on Thursday, the ECB will meet to decide interest rate policy. At this stage no change in policy is expected. In the US on Friday, Donald Trump will be sworn in as the 45th president of the United States. While there is no consensus on how markets will react to this event, traders will be hoping that Trump will start to give more details on his policy ideas. Also on Friday, Chinese 4th Quarter GDP will be released along with retail sales and industrial production.
Data releases:
· GBP CPI 08:30pm AEDT
· US Empire State Manufacturing Index 12:30am AEDT