Originally published by Rivkin Securities
Following on from one of the strongest single day gains since the Global Financial Crisis in the ASX 200 yesterday, US stocks have also staged a significant rally. The Dow Jones closed 1.77% higher with a large rally in the last two hours of trading contributing to most of the gains. Tech stocks also rebounded with the Nasdaq 100 climbing 1.43% while the S&P 500 rose 1.57%. The question now is whether this marks the end of the correction that has seen losses of around 10% on most major indices in October. This seems to support the ‘October effect’ theory that stocks tend to decline in October but the statistics do not actually support the theory.
Oil prices are still weak as inventory builds in the US over the last few weeks has damped bullish optimism. This time of year typically produces inventory builds as demand from refiners declines as a result of many of them performing maintenance on their plants. This means the gasoline stockpiles typically decline while crude stocks climb from approximately October through January. The bullish argument for crude still centres on Iran sanctions which are due to begin in November and continued output declines from Venezuela.
Gold prices have stagnated as a strong US dollar keeps a lid on prices. The Australian dollar price of gold fell from five-month highs overnight as the Australian dollar holds up despite the stronger US dollar. The US dollar index is currently at 97.0, a one year high while the Australian dollar is holding near a three-year low at US$0.710.
Today Australian CPI data will be released which is expected to show that annualised inflation is running at around 2%. After yesterday’s large gains, S&P/ASX 200 futures are down five points this morning.
Data Releases:
- Australia CPI 10:30 am AEST
- Japan Interest Rate Decision Unspecified time