“AUD remains topical following the collapse to start the year. It now trades with a nice discount on our metrics, which, when coupled with positioning, suggests much bad news sits in the price. We like buying on dips in the 0.6800/50 zone, reflecting a reduction of this risk premium. We also note that AUDNZD now trades at a 2.5% discount to HFFV, offering attractive entry levels.”
Local: Trade November
TD Securities on the trade data: “We anticipate a $3.8b trade surplus for Nov, which is below the $4.2b surplus consensus. Driving our below market forecast is a 1% drop in exports on a likely decline in iron ore exports while imports should pick up by roughly 1%. The monthly trade surplus has been steadily declining since peaking in June last year.”
Overseas data: China producer and consumer price data December; Euro zone unemployment rate November; US Challenger job cuts December, Initial jobless claims December
US Federal Reserve speakers: Clarida, Williams, Evans Bullard
ASX futures up 63 points or 0.9% to 6815 near 6.55am AEDT
- AUD flat at 68.71 US cents (Overnight low 68.49)
- On Wall St near 2.50pm: Dow +0.8% S&P 500 +0.7% Nasdaq +0.9%
- In New York: BHP +0.6% Rio +1.4% Atlassian +2.2% Apple +1.5%
- In Europe: Stoxx 50 +0.4% FTSE flat CAC +0.3% DAX +0.7%
- Nikkei 225 futures +1.8%
- Spot gold -1% to $US1559.49 / oz at 1.31pm New York
- Brent crude -4.4% to $US65.26 a barrel
- US oil -5.1% to $US59.49 a barrel
- Iron ore +1.2% to $US96.22 a tonne
- Dalian iron ore -0.4% to 674.5 yuan
- LME aluminium -0.9% to $US1800 a tonne
- LME copper +0.5% to $US6180 a tonne
- 2-year yield: US 1.57% Australia 0.77%
- 5-year yield: US 1.65% Australia 0.82%
- 10-year yield: US 1.86% Australia 1.18% Germany -0.21%
- 10-year US/Australia yield gap about 5.15am AEDT: 68 basis points
From today’s Financial Review
ASIC targets brokers over ‘poor’ funds: The corporate regulator will audit stockbrokers being paid commissions by fund managers and investigate misselling of poor performing listed investment funds to retail investors.
Chanticleer: Europe’s heavy blow against natural gas: The publication next month of the European Union procurement plan for achieving net-zero carbon emissions by 2050 will send shockwaves through the global natural gas industry.
Macquarie model defeats APRA’s bonus cap: The prudential regulator accepts it may need to go back to the drawing board on executive pay guidelines.
Trump, Iran tensions ease; S&P 500 resets record high: Global markets rallied after President Trump signalled no further immediate military escalation in the confrontation between the US and Iran.
US private payrolls post largest gain in eight months: The ADP National Employment Report showed private payrolls jumped by 202,000 jobs last month, the largest gain since April.
Capital Economics on Friday’s payrolls: “The 202,000 gain in the ADP’s measure of private employment in December suggests some upside risk to our estimate that the official figures, due on Friday, will show a 150,000 gain in non-farm payrolls. In any case, the big picture is that both GDP and employment growth appear to have held up fairly well in the fourth quarter.”
Full Brexit deal is ‘basically impossible’ to achieve in one year: European Commission head Ursula von der Leyen has cast doubt on Boris Johnson’s timetable for a full Brexit deal to be ready by the end of 2020.
European shares ended higher on Wednesday after Iran indicated the overnight missile strikes “concluded” its retaliation to the US killing of General Qassem Soleimani.
Tehran’s attack on US military bases in Iraq initially raised fears of a wider war in the Middle East, spurring a flight to safer assets and causing the pan-European STOXX 600 to fall as much as 0.6%.
However, the benchmark index gradually recovered and closed 0.2% higher as Iran said it did not seek to escalate the confrontation.
Germany’s DAX outperformed regional bourses as the positive geopolitical development overshadowed an earlier data showing an unexpected fall in industrial orders in November in the country.
France’s Airbus, among the biggest boosts to the pan-regional index, rose 2% as its US rival Boeing Co’s 737-800 jet belonging to a Ukrainian airline burst into flames shortly after take-off from Tehran, killing all 176 people aboard.
Airbus shares helped the travel and leisure to lead the charge among European subsectors with its 0.7% gain. On the other hand, Boeing suppliers Senior Plc, Safran and Melrose slipped between 0.1% and 1.2%.
In Britain, the blue-chip index lagged its European peers, weighed down by losses in shares of energy giants BP and Royal Dutch Shell which tracked oil prices lower.
Hong Kong’s main Hang Seng index finished firmer on Tuesday, lifted by tech firms. At the close of trade, the Hang Seng index was up 95.87 points or 0.34% at 28,322.06. The Hang Seng China Enterprises index rose 0.3% to 11,198.75.
Tencent Holdings, which gained 2.2%, was the top gainer on the Hang Seng, while the biggest loser was PetroChina, down 1.7%.
China’s main Shanghai Composite index closed up 0.69% at 3104.80 points, an eight-month closing high, while the blue-chip CSI300 index ended up 0.8% at its highest finish since February 2018.
In Tokyo on Wednesday, the Nikkei index ended down 1.57% at 23,204.76. The industrial and consumer discretionary sectors faced broad-based declines as shares of industrial robot maker Fanuc and apparel retailer Fast Retailing.
“Investors are unwinding long positions built up last year,” said Kiyoshi Ishigane, chief fund manager at Mitsubishi UFJ Kokusai Asset Management Co in Tokyo.
“There is concern about what comes next in the Middle East. Another concern is oil prices will skyrocket at a time when Japan’s manufacturing sector is weak, which is a negative for the corporate sector.”
There were 213 decliners on the Nikkei index against 11 advancers on Wednesday.
Don’t bank on US dollar demise: Despite Donald Trump’s threatened currency war, the US dollar’s dominant global role will persist because of the strength of American capital markets.
Ireland kicked off its funding drive for 2019 by raising 4 billion euros via a new 15-year bond sale after being swamped with bids for its debut issue for the second successive year, the country’s debt agency said on Wednesday.
Ireland has raised a chunk of the cash needed for the coming 12 months in the first week of January every year since 2013 and covered around a third of 2020’s more modest 10 to 14 billion euro issuance target with Wednesday’s syndicated sale.
Portugal, which like Ireland, required a sovereign bailout after the financial crisis, is set to price a 4 billion euro 10-year bond at even higher demand with books last exceeding 24 billion euros. It follows a syndicated sale by Slovenia on Tuesday.
Oil dives on soothing words from US, Iran: Brent futures, which surged as high as $US71.75 in early trade, were down $US2.44, or 3.6 per cent, to $US65.83 a barrel by midday in New York.
US crude oil stockpiles rose unexpectedly last week and gasoline inventories surged by their most in a week in four years, the Energy Information Administration said on Wednesday.
Crude inventories rose by 1.2 million barrels in the week ended January 3 to 431.1 million barrels, compared with analysts’ expectations in a Reuters poll for a 3.6 million-barrel drop.
India to ease mining rules from March to spur investment: India plans to introduce global tenders for coal mining blocks in March, a move that could lure BHP among others to the country.
Zinc prices hit the highest in nearly eight weeks amid concerns about short-term supplies of the metal, mainly used for galvanising steel, increased.
Three month zinc was the top performer on the London Metal Exchange, gaining 2.4% to $US2403 a tonne in final open-outcry trading after touching $US2415, the highest since November 14.
Zinc inventories in LME-registered warehouses have tumbled by 61% over the past 12 months to 50,175 tonnes, the lowest since November 8, according to LME data.
Palladium extended its rally, undaunted by most market events driving other precious metals. Prices were up 2.4% at $US2100, close to the all-time high of $US2106 notched earlier in the session.
Major banks slammed for abandoning wealth: AMP and IOOF say remaining in wealth management is a “moral obligation” to “middle Australia” as the big four banks plan their exits from the business.
Australian shares closed marginally lower on Wednesday, with the attention of markets again concentrated on the Middle East and a retaliatory strike by Iran.
The benchmark S&P/ASX 200 closed 8.8 points, or 0.13 per cent, lower at 6817.6 points.