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Things to watch: Australia business and consumer confidence; China optimism

Published 12/09/2023, 08:56 am
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Investing.com - In the face of growing optimism surrounding the economic outlook for China, the S&P/ASX 200 is expected to start on a positive note, driven by notable increases in gold, oil, and iron ore prices.

By 9:00am AEST (11:00pm GMT) ASX 200 Futures were up by 0.7% to 7,246.5 ahead of closely watched business and consumer confidence surveys later in today's session.

The Chinese economy has shown promising signs of stabilization, following a considerable downturn. The country's credit demand has seen an upturn, deflationary forces are lessening, and the yuan is gaining strength. The CSI 300 Index, China's benchmark, broke a four-day losing streak with a 0.7% rise on Monday. The yuan also bounced back after reaching its lowest point against the dollar since 2007, following decisive guidance from the People's Bank of China emphasizing its confidence in maintaining yuan stability.

Goldman Sachs Group Inc (NYSE:GS) conveyed a generally positive outlook on Chinese equities for the remainder of 2023. However, it cautioned that the ongoing property crisis in China is a significant obstacle. The property sector, which is deeply embedded in the Chinese economy and equity markets, represents a significant portion of Chinese households' asset allocation, directly and indirectly contributes to a substantial part of the GDP, and accounts for about 15% of corporate earnings for listed companies.

In the tech sector, Tesla Inc (NASDAQ:TSLA) saw a significant surge after Morgan Stanley (NYSE:MS) upgraded the electric vehicle company from "equal-weight" to "overweight", stating that Tesla's Dojo supercomputer could potentially increase the company's market value by nearly $US600 billion.

The Australian dollar saw a 0.8% increase yesterday, while the US Dollar Index dipped by 0.5%. At the same time, Bitcoin experienced a 2.7% loss.

An upcoming asset sale by the dissolved crypto exchange FTX and its associated companies is contributing to market volatility. FTX currently holds nearly $US1.2 billion in SOL, the native token of the Solana network, along with $US560 million in Bitcoin and $US192 million in Ether.

In the U.S., the yield on the 10-year note rose to 4.291%. Traders predict a 93% probability of the central bank maintaining its current interest rates in the September meeting, with a nearly 61% chance of a pause in November.

In commodities, U.S. crude stockpiles are at their lowest since December due to Saudi Arabia and Russia's continued production cuts, leading to a tightening oil market. Meanwhile, the global aluminum supply negotiations are set to start in Barcelona this week, with concerns about Russian metal sales expected to dominate the discussions.

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