Originally published by AxiTrader
Quick Recap
It's here. And while America votes global markets have already placed their bet that Hillary Clinton will be the next occupant of the Oval Office. Stocks are higher across the board, the Mexican peso is stronger against the US dollar, and the yen, bonds are up near October highs, and as the pall has lifted the Aussie dollar is breaking higher.
Heaven help traders today if they have got it wrong.
What You Need To Know
International
- It’s green across global stock markets this morning as the surge in risk aversion continues after traders have become convinced that the US election is a lock for Hillary Clinton.
- With 100 minutes left in trade the S&P 500 is up another half a per cent at 2142, the Dow Jones Industrial Average is up close to 100 points at 18355 and the Nasdaq 100 is up at 5199. In the UK and Europe stocks were also up a similar amount.
- Bonds have drifted higher as well. US 10’s are back at 1.87 just a point below the October high. Of course that’s a bet on Clinton but it’s also a bet on the fed hike in December and a positive economy.
- On the Fed Chicago president Charles Evans said it is reasonable for the fed to raise rates this December but reiterated it’s the path of rates, not this move that matters. It is increasingly looking like the notion of running the economy hot is taking hold.
- Now we wait for the election result. Heaven help us if the markets and the polls are wrong…it could be one of the ugliest days since 1987 across global markets.
Elsewhere
- In another example that the pound is the great hope of the UK economy data released last night showed UK manufacturing surged in September.
- India gave just 4 hours notice to withdraw its two largest denomination bank notes overnight. The move is to fight corruption and the previous notes, while no longer legal tender, can be changed by citizens in the next 50 days – as long as you provide ID.
- Big global banks have warned clients about potential volatility in markets today.
Australia
- How disappointed must the bulls have been with the anemic rally on the ASX yesterday which left the market up 7 points for a gain of 0.13% and close at 5257. That was 25 points or so off the high for the session but even 5282 wasn’t the strongest leap higher from local traders.
- Again it speaks to the underlying tone of the local market. Yesterday the banks dip after Commonwealth Bank Of Australia. (AX:CBA) earnings resources did okay which helps explain the positive feeling for the Aussie dollar. Yes folks say this commodity rally can’t last but the punditry’s calls – like pollsters – don’t carry the weight they used to.
- Anyway Futures traders are betting the S&P/ASX 200 will roar this morning and have the SPI 200 up 31 points at 5276.
- The NAB business survey was quieting yesterday. It’s my single most important economic release each month because I believe that it gives a window into so much of the Australian economy. So the clear slippage in conditions, and the sub indexes which underpin it like trading and employment gives me pause to reconsider the path of the economy in the quarters ahead.
- My sense – like NAB chief economist Alan Oster who dropped his “solid” description of conditions – is that the Australian economy is moderating as we head into 2017. That also has me pushing the door a little further ajar for another rate cut next year which naturally also has implications for the Aussie dollar’s value. That means the run to and above 80 cents could be a short one.
Forex
- A quick look around the grounds and we see that forex traders are again unwinding their Trump fear trades. The Mexican peso Japanese yen cross (MXN/JPY) is up 1.5% from this time yesterday at 5.70. The Yen itself is down 0.62% with USD/JPY at 105.09 and the peso has gained 0.85% and is down at 18.32. These are the three forex rates to watch as results come out.
- Two things they’ll tell you:
- Whether forex traders are getting antsy as results flow about a surprise Trump victory; and
-
- Whether the Clinton victory is already baked into the cake after this week’s moves (ie if there is no further movement in these rates)
- Another result of traders voting for Clinton is that the surge in relief and rise in risk appetite has been the continued push higher of the Australian dollar which is up another 0.25% from this time yesterday at 0.7766. And on its highs for the past 24 hours.
- It’s now through the top of the 3 month or so range – here’s the chart;
Commodities
- Copper's amazing surge continued again overnight as the metal with a Phd benefits from both solid Chinese data and the risk on rally across global markets. It’s spent a lot of time sitting on that 12 year trendline this year and this surge is a bit of catch up to the metals rally it has so far missed.
- Any look at a short term chart would have most traders crying – get out. But it you take a long view, one that looks back to the beginning of the collapse from 2011 its fairly easy to see a move to $2.54 a pound over the next few months and maybe even $2.91 (on a one year or so basis).
- Gold is $1276 this morning and under more pressure if Clinton wins, perhaps back to $1260.
- Crude Oil is in a culvert while everyone else is focussed on the election. It’s sitting at $45 this morning in WTI terms.
Today's key data and events (all times AEDT)
- Australia - Westpac Consumer Confidence (Nov) (10.30am); Mid-Year Economic and Fiscal Outlook (11.30am)
- New Zealand - Electronic Card Retail Sales (MoM) (Oct), Electronic Card Retail Sales (YoY) (Oct) (8.45am);
- China - Producer Price Index (YoY) (Oct), Consumer Price Index (MoM) (Oct), Consumer Price Index (YoY) (Oct) (12.30pm)
- Japan - Bank lending (YoY) (Sep), BOJ Summary of Opinions, Money Supply M2+CD (YoY) (Oct), Current Account n.s.a. (Sep), Trade Balance - BOP Basis (Sep), Machinery Orders (YoY) (Sep), Machinery Orders (MoM) (Sep) (10.50am); Eco Watchers Survey: Current (Oct), Eco Watchers Survey: Outlook (Oct) (4pm)
- Germany - Nil
- EU - European Commission Releases Economic Growth Forecasts (9pm)
- UK - RICS Housing Price Balance (Oct) (11.01am); 30-y Bond Auction (n/a); Trade Balance; non-EU (Sep), Goods Trade Balance (Sep), Total Trade Balance (Sep) (8.30pm)
- Canada - Nil
- US - API Weekly Crude Oil Stock (8.30am); MBA Mortgage Applications (Nov 4) (11pm); Wholesale Inventories (Sep) (2am); EIA Crude Oil Stocks change (Nov 4) (2.30am); 10-Year Note Auction (5am)
Have a great day's trading