The ASX is set to open higher today, with ASX Futures (SPI 200) implying the ASX 200 will open 72 points higher, up 1.03%.
The ASX 200 closed 109 points (-1.54%) lower yesterday at 7,024.
This positive sentiment reflects the S&P 500 and Dow’s slightly higher close overnight, which snapped a four-day losing streak.
The US dollar took a hit after the Bank of Japan raised its yield curve band. BoJ Governor Kuroda has insisted the move wasn’t a rate hike or an exit from YCC policy, but it does set the scene for the BoJ to join the cadre of central banks raising interest rates in 2023.
Meanwhile, gold soared to a fresh six-month high and German producer prices continue to deflate thanks to falling energy prices, which has forced Russian crude oil exports to fall off a cliff.
Here’s what we saw (source Commsec):
- The Euro rose from lows near US$1.0577 to highs near US$1.0653 and was near US$1.0620 at the US close.
- The Aussie dollar lifted from lows near US66.28 cents to highs near US66.96 cents and was near US66.75 cents at the US close.
- The Japanese yen rose from 133.62 yen per US dollar to JPY130.65 and was near JPY131.70 at the US close after the Bank of Japan decided to let long-term bond yields move 50 basis points either side of its 0% target, wider than the previous 25 basis point band.
- Global oil prices swung on Tuesday in a session marked by waning liquidity ahead of the holiday season, as traders weighed a weaker US dollar and winter supply disruptions in the US against a potential boost in crude demand after China relaxed its 'zero-COVID' policy.
- The Brent crude oil price rose by US19 cents or 0.2% to US$79.99 a barrel.
- The US Nymex crude oil price gained US90 cents or 1.2% to US$76.09 a barrel. Base metal prices climbed on Tuesday.
- Aluminium rose by 0.5%, helped by a weakening US dollar and a sharp fall in inventories available on the London Metal Exchange. Copper was up by 0.6%.
- The gold futures price rose by US$27.70 an ounce or 1.5% to US$1,825.40 an ounce.
- Spot gold was trading near US$1,818 an ounce at the US close.
- Iron ore futures lifted US30 cents a tonne or 0.3% to US$109.86 a tonne.
The World Bank has slashed its China growth forecast for the year to 2.7% from 4.3% predicted in June. It has based the decision on the pandemic and weaknesses in China’s property sector, which has had a big impact on the world’s second-largest economy.
The forecast for 2023 was also revised from 5.2% down to 4.3%. The figures are well below Beijing’s GDP growth target of around 5.5% for the year.
Several analysts believe this figure is now unattainable.
“Economic activity in China continues to track the ups and downs of the pandemic — outbreaks and growth slowdowns have been followed by uneven recoveries,” the World Bank said.
“Real GDP growth is projected to reach 2.7% this year, before recovering to 4.3% in 2023, amid a reopening of the economy.”
China has now abandoned its zero-COVID policy; however business disruption continues as cases surge.
Repairing China relations
Foreign Minister Penny Wong is in Beijing for talks with Chinese Foreign Minister Wang Yi.
This will be the sixth Australia-China Foreign and Strategic Dialogue and the first steps to perhaps properly normalising relationships.
"Our talks coincide with the 50th anniversary of diplomatic relations between Australia and the People’s Republic of China," Wong tweeted.
Wong’s visit to China is the first by an Australian government official in almost three years: former Trade Minister, Senator Birmingham, attended a trade expo in Shanghai in 2019.
"We have much to discuss. Australia’s approach is to cooperate where we can, disagree where we must and engage in the national interest," Senator Wong said.
“I acknowledge and thank the government of the People’s Republic of China for the invitation to be here so that we can spend the 50th anniversary of diplomatic relations between our two countries,” she said.
“I look forward to the meeting in which we have to (discuss) the issues that are important to us.”
Wong will raise issues related to consular cases, human rights and trade concerns.
“I think the mark of success is dialogue itself,” she said.
“We obviously have a lot of issues to work through and dialogue is a prerequisite for working them through.”