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Dollar, commodities surge, US dips

Aussie shares look set to open lower as surging commodity costs are tempered by a two-and-a-half-year high in the dollar and a modest drop on Wall Street.

ASX SPI200 index futures fell thirty six points or even 0.5 per cent. US stocks finished mixed. Iron ore soared 5 per cent to a fresh multi-year high. Crude oil cracked US$50 a barrel for the very first time since March. The dollar climbed to its highest level since June 2018.

Wall Street
US stocks struggled as a result of the opening bell amid mixed signals on stimulus talks. A jump in claims for jobless benefits underlined strains on the economy. The S&P 500 pared initial losses to complete 5 points or 0.13 per cent in the red.

The Dow Jones Industrial Average traded both sides of 30,000 for a great deal of the session prior to doing seventy points or maybe 0.23 per cent weaker at 29,999. Strength in’ stay at home’ stocks lifted the Nasdaq Composite sixty seven points or perhaps 0.54 every cent.

Hopes for a stimulus deal waxed and waned. Treasury Secretary Steven Mnuchin said talks had made “a lot of progress”. Democrat House Speaker Nancy Pelosi agreed there had been “great progress”. Still Republican Senate Majority Leader Mitch McConnell’s office indicated Senate Republicans won’t support the latest proposal. The Senate whip John Thune predicted a deal would need to hold off until next year.

“If we do not get stimulus by the end of the year, you could certainly have a risk-off maneuver in the market,” Frank Rybinski, chief macro strategist at Aegon Asset Management, told CNBC.

First-time claims for unemployment benefits climbed from 716,000 to 853,000 last week, topping 800,000 for the first time after October. The total was a lot even worse as opposed to the 730,000 expected by economists polled by Dow Jones.

“Given the latest behaviour of initial statements, we will probably see additional increases in continuing claims going forward,” Thomas Simons, cash market economist at Jefferies, wrote. “Evidence has been building indicating that claims arrive at an inflection point in early November due to rising COVID case numbers and forced the imposition of social distancing policies that actually harm the service sector of the economy.”

Australian outlook
A real mixed bag for localized investors this early morning. A lot of positives and plenty plenty of negatives. Is like a sharp split forward involving winners and losers.

For starters, the positives. Iron ore soared $7.50 or even five per cent to US$158.25 a tonne, an eight-year peak, as reported by CommSec. Brent crude settled $1.39 or 2.8 per cent higher at US$50.25 a barrel, the first close of its above US$fifty since the original days of the pandemic sector plunge.

Energy stocks outperformed in the US, rising 2.9 a cent. tech stocks as well as Financials also rose, two more pluses for our industry. Wall Street completed well off its low – another plus.

Now to the downsides. Those stellar benefits in commodity prices fed directly into the dollar. The Aussie surged 1.2 per cent to 75.35 US cents. The regional currency is traded by a lot of forex players like a standard commodity proxy.

Other negatives? The increase in iron ore was caused by a cyclone off the Pilbara coast. Any harm or perhaps stoppages at local producers would dent share rates. Wall Street finished broadly lower. Oddly, the US materials sector fell 0.7 a cent. 7 straight gains has left the ASX looking vulnerable to even more profit taking. The S&P/ASX 200 is up 2.5 per dollar for the month despite yesterday’s 0.7 per cent setback.

So the playbook for the day appears something such as this: good leads for miners, oilers and importers ; negative leads for other exporters as well as companies that create considerable revenue in US dollars. The latter include Macquarie Group, News Corp, Brambles, Amcor, Ansell, Appen, Altium, Aristocrat, James Hardie, ResMed, Cochlear, and CSL .

Commodities
Barring news that is bad from Tropical Cyclone Damien, iron ore majors BHP, rio Tinto and Fortescue appear set for fresh multi year/record highs. BHP’s US listed stock put on 2.78 per cent and its UK listed stock 3.17 per cent. Rio Tinto rose 2.22 per cent in the US and 2.91 per cent in the UK.

Iron ore rose for a 12th straight session. The cost has now gone parabolic & looks vulnerable if Tropical Storm Damien passes with no incident.

“The market place is within disequilibrium right this moment – investors are trading industrial metals like iron ore as a speculative play on exactly how China’s economy is going to perform,” Atilla Widnell of Navigate Commodities told Bloomberg. “There is not any way iron ore could be at US$150 based on need as well as supply fundamentals.”

Gold dipped for a second day in front of what’s likely to become a green light from the US regulator for Pfizer’s Covid 19 vaccine. Gold for February delivery settled $1.10 or perhaps less than 0.1 per cent weaker at US$1,837.40 an ounce. The NYSE Arca Gold Bugs Index edged up 0.32 a cent.

“Vaccine information is actually bearish for gold,” Chintan Karnani, chief market analyst at Insignia Consultants, told MarketWatch.

Copper and nickel set the pace during a solid night for industrial metals on the London Metal Exchange. Benchmark copper rose 2 per cent to U$7,860.75 tonne. Nickel received 4.4 per cent, aluminium 1.3 per cent, zinc 0.3 per cent and tin 0.2 per cent. Direct shed one per cent.

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