[email protected]: Fresh highs beckon for ASX following record close on Wall St

Wall Street hit fresh record highs overnight, continuing to benefit from a perceived de-escalation in geopolitical tensions between the United States and Iran. With SPI futures pointing to modest gains on the open, local stocks could join US markets in record territory this morning. On the data front, all eyes will be on the release of Australia’s retail sales report for November. Internationally, the main event comes from the United States with the release of December nonfarm payrolls.

The ASX looks set to test the intra-day record highs hit in December in early trade this morning.
The ASX looks set to test the intra-day record highs hit in December in early trade this morning. Credit:Tamara Voninski

1. US and Iran tensions apparently diminishing: Market commentary remains largely focused on analysing the possible risks from this week’s growing geopolitical tensions between the US and Iran. And looking at price action, it would appear traders are willing to take a bet that the issue ought to settle-down now. Risk assets climbed overnight, and market dynamics continued to return to what they were prior to the Iranian missile attacks against the US military. Stock indices have rallied across the globe, while gold has fallen, and oil prices have stabilised.

2. US stocks challenge records: The diminished risk of conflict in the Middle East has provided catalyst for US stocks to trade at fresh record highs. The benchmark S&P500 climbed by over half per cent overnight, led by strong buying of tech and financial sector stocks. Boeing shares also supported the rally, jumping nearly 1 and a half per cent, as reports flowed through the market that the passenger airplane that crashed in Iran this week may have been downed by Iranian backed forces.

3. Gains spread across global indices: Similarly, solid gains were observed in other major stock indices yesterday. Chinese equities and the Hang Seng added in excess of 1 per cent. The Nikkei rallied by 2.3 per cent, aided by a drop in the Japanese Yen. The DAX delivered a 1.3 per cent gains, while FTSE100 edged higher by a relatively more modest 0.3 per cent. And the ASX200 finished Thursday’s session over 0.8 per cent stronger, coming within 9 points of its own record highs during intraday trade.


4. ASX to open higher, Retail Sales in focus: SPI futures are pointing to a more settled start to the day’s trading for the ASX200 this morning, suggesting the index ought to add 5 points at the open. The day’s trade locally will be heavily focused on the release of Retail Sales data for the month of November at 11.30AM (AEDT), for a read on how the ailing Australian consumer is faring. The data is expected to reveal sales expanded by 0.4 per cent on a MoM basis.

5. China data boosts hopes for stimulus: Chinese economic data provided a small uplift to risk appetite on Thursday. CPI and PPI numbers were printed, and revealed the former expanded by 4.5% YoY last month, while the latter contracted by 0.5%, YoY. The PPI numbers proved somewhat disappointing. But the CPI figures came as a pleasant surprise to traders. It showed a small drop in consumer inflation, and supported the notion that Chinese policymakers may have more wriggle room to ply stimulus to China’s economy, if it were required.

6. Pound drops as BOE cuts flagged: The Pound dipped into the 1.30 handle last night, as further doubts were cast over the strength of the UK economy. Several UK retailers, including Tesco and Marks and Spencer flagged that consumer activity in the economy over the holiday period was sluggish. The pain for the Pound was compounded last night by a speech delivered by Bank of England head Mark Carney, who acknowledged currently weak economic fundamentals, and the potential need for monetary policy stimulus to support future growth.

7. US jobs numbers to cap-off the week: The week’s trade will culminate in the release of US Non-Farm Payrolls data tonight. The US jobs numbers are estimated to show that the US economy added 162k new jobs last month, and managed to maintain the unemployment rate, at 3.5%, at a 50-year low. Market participants will be looking for another “goldilocks” print from the jobs data, with a robust jobs change number, but a steady wage growth figure that show’s inflation remains at bay in the US economy.

8. Market wrap 

ASX futures up 16 points or 0.2% to 6831 near 6.45am AEDT

  • AUD -0.2% to 68.51 US cents
  • On Wall St about 2.30pm: Dow +0.7% S&P 500 +0.6% Nasdaq +0.7%
  • In New York: BHP -0.9% Rio -0.8% Atlassian +3% Apple 2%
  • In Europe: Stoxx 50 +0.6% FTSE +0.3% CAC +0.2% DAX +1.3%
  • Nikkei 225 futures flat
  • Spot gold -0.3% to $US1552.15/oz at 1.09pm New York
  • Brent crude flat at $US65.45 a barrel
  • US oil -0.3% to $US59.44 a barrel
  • Iron ore -1.9% to $US94.37 a tonne
  • Dalian iron ore -1.1% to 660 yuan
  • LME aluminium +0.2% to $US1803.50 a tonne
  • LME copper flat at $US6180 a tonne
  • 2-year yield: US 1.59% Australia 0.80%
  • 5-year yield: US 1.66% Australia 085%
  • 10-year yield: US 1.86% Australia 1.23% Germany -0.18%
  • 10-year US/Australia yield gap near 5.15am AEDT: 63 basis points

This column was produced in commercial partnership between The Sydney Morning Herald, The Age and IG

Listen to IG’s podcast Chatting Markets here

Information is of a general nature only.

Most Viewed in Business

Source: Thanks smh.com