[email protected]: ASX set for flat start, Aussie dollar tumbles

Wall Street slipped overnight as a stronger US dollar and continued unease over US-Iran tensions weighed on risk appetite. After posting strong gains on Wednesday, the ASX looks set to open flat today.

Wall Street slipped modestly on Wednesday.
Wall Street slipped modestly on Wednesday.Credit:AP

1. US and Iran tensions top headlines: The war of words between the US and Iran has captured the greatest attention in the past 24 hours, as market participants attempt to decipher what material impact escalating tensions in the Middle East will have on global markets. Price action suggests that current outlook is somewhat mixed. Stock indices have vacillated to begin the week, but oil is off its highs. Safe have currencies outperformed growth sensitive ones, as did gold. But global bond yields have generally edged higher.

2. Oil and gold take different paths: Oil and gold prices have been the two most closely watched assets as traders digest the implications of the assassination of Iranian General Qassem Soleimani by the US. Last night, oil fell, seemingly as the market discounted a lower likelihood that either the Iranians or US will target energy assets during this conflict. However, gold managed to edge higher once again, probably in equal parts due to a search for safety by investors, as well as some speculative behaviour amongst short-term traders.

3. Stock indices traded mixed: Stock indices across the globe swung in the past 24 hours, mostly due to the ripple of effect of General Soleimani’s assassination. In a reversal of fortune from Monday’s price action, Asian and European indices outperformed their US counterparts. The Nikkei added 1.6 per cent in a high activity day’s trade in Japan, and the DAX managed to gain 0.7 per cent. Wall Street stocks fell however, with the S&P500 dipping just shy of 0.1 per cent overnight.


4. ASX to open flat this morning: The ASX200 is set-up for a practically flat open this morning, with SPI Futures pointing to a 6-point gain for the index. It’ll back up what was a strong day yesterday for the index, which managed to rally 1.35 per cent, in a thin day’s trade. The gains were very broad based, with 86.5 per cent of stocks higher for the session, and every sector finishing in positive territory. The financials sector carried most of the load, rebounding from Monday’s big losses.

5. Aussie data disappoints: Australian economic data, and the accompanying analysis, was negative yesterday. ANZ Consumer Confidence figures were released, and revealed a drop-in consumer sentiment in the Australian economy last week. The dynamic was largely attributed to the effects of the current bushfire crisis in Australia. The analysis supported another research piece released by Goldman Sachs yesterday, that suggested that the bushfires ought to wipe 0.3 per cent off GDP in the final quarter of 2019 and the first quarter of 2020.

6. Australian Dollar drops: The Australian Dollar tumbled in the past 24 hours, largely due to concern about continued weakness in Australian consumption. The currency was the biggest laggard amongst G10 currencies, falling over 1 per cent, as traders upped their bets that the RBA will be forced to cut interest rates next month. The price action in the AUD/USD saw the pair break below its much watched 200-day EMA, an indicator that has provided strong technical resistance in the past.

7. USD climbs on services PMI beat: A stronger USD was also responsible for the sell-off in the AUD. The greenback managed to reclaim some of its recent losses, after the release of US ISM Non-Manufacturing PMI data printed stronger than expected overnight. The services sector indicator was shown to have expanded to a 55.0 reading last month, beating the forecast figure of 54.5, and allaying some of the concerns elicited by last week’s US manufacturing PMI numbers that business conditions in the US economy are deteriorating.

8. Market Wrap 

ASX futures were down 0.2 points at 6762 near 7.50am AEDT

  • AUD -1% to 68.69 US cents
  • On Wall St ear 3.30pm: Dow -0.3% S&P 500 -0.1% Nasdaq +0.1%
  • In New York about 1.15pm: BHP +0.1% Rio flat Atlassian +1%
  • In Europe: Stoxx 50 +0.2% FTSE flat CAC flat DAX +0.8%
  • Nikkei 225 futures -0.5%
  • Spot gold +0.4% to $US1571.17/oz at 1.07pm New York
  • Brent crude 1.5% to $US67.87 a barrel
  • US oil -1.4% to $US62.38 a barrel
  • Iron ore -0.5% to $US95.11 a tonne
  • Dalian iron ore +1.8% to 677.5 yuan
  • LME aluminium -0.9% to $US1816 a tonne
  • LME copper +0.2% to $US1649 a tonne
  • 2-year yield: US 1.54% Australia 0.79%
  • 5-year yield: US 1.62% Australia 0.84%
  • 10-year yield: US 1.83% Australia 1.21% Germany -0.29%
  • 10-year US/Australia yield gap at 7.30am AEDT: 62 basis points

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