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Dollar, commodities surge, US dips

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

ASX SPI200 index futures fell 36 points or even 0.5 a 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 first time since March. The dollar climbed to the highest level of its 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 first losses to finish 5 points or 0.13 per cent in the red.

The Dow Jones Industrial Average traded each side of 30,000 for most of the session prior to doing 70 points or perhaps 0.23 every dollar weaker at 29,999. Strength in’ stay at home’ stocks lifted the Nasdaq Composite sixty seven points or 0.54 per cent.

Hopes for a stimulus buy waxed as well as waned. Treasury Secretary Steven Mnuchin said talks had made “a plenty 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 most up proposal. The Senate whip John Thune predicted a deal would need to wait until next year.

“If we don’t get stimulus by the tail end of the year, you can certainly have a risk-off action 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 since October. The total was a lot worse in comparison to the 730,000 expected by economists polled by Dow Jones.

“Given the latest behaviour of initial statements, we will likely see additional increases in ongoing claims going forward,” Thomas Simons, cash market economist at Jefferies, wrote. “Evidence has been building indicating that claims hit an inflection point in early November thanks to rising COVID case numbers and forced the imposition of societal distancing policies that really hurt the service segment of the economy.”

Australian outlook
A real mixed bag for local investors this early morning. Lots of positives as well as plenty lots of negatives. Is like a sharp split ahead between losers as well as winners.

To begin with, the positives. Iron ore soared $7.50 or perhaps 5 per cent to US$158.25 a tonne, an eight year peak, according to CommSec. Brent crude settled $1.39 or even 2.8 per cent higher at US$50.25 a barrel, the first close of its above US$50 since the original days of the pandemic market plunge.

Energy stocks outperformed in the US, rising 2.9 per cent. tech stocks as well as Financials also rose, 2 more pluses for our industry. Wall Street finished well off its great – another plus.

Today to the negatives. Those stellar benefits in commodity prices fed straight 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 classic commodity proxy.

Some other negatives? The rise in iron ore was triggered by a cyclone off the Pilbara coast. Any damage or perhaps stoppages at local producers would dent share rates. Wall Street completed broadly lower. Oddly, the US supplies sector fell 0.7 a cent. 7 straight gains has left the ASX looking vulnerable to further profit taking. The S&P/ASX 200 is actually 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: positive leads for miners, importers and oilers ; negative leads for various exporters and businesses that generate considerable revenue in US dollars. The latter include CSL, Cochlear, ResMed, James Hardie, Aristocrat, Altium, Appen, Ansell, Amcor, Brambles, News Corp and Macquarie Group .

Commodities
Barring news that is bad from Tropical Cyclone Damien, iron ore majors BHP, Fortescue and rio Tinto look set for fresh multi year/record highs. BHP’s US listed inventory placed 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 price has now gone parabolic & looks weak if Tropical Storm Damien passes with no incident.

“The market place is actually within disequilibrium right now – investors are trading manufacturing metals like iron ore as a speculative play on the best way 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 ahead of what is likely to be a green light from the US regulator for Pfizer’s Covid-19 vaccine. Gold for February delivery settled $1.10 or even less than 0.1 per dollar weaker at US$1,837.40 an ounce. The NYSE Arca Gold Bugs Index edged up 0.32 per cent.

“Vaccine info is bearish for gold,” Chintan Karnani, chief industry analyst at Insignia Consultants, told MarketWatch.

Copper and nickel set the pace during a good night for industrial metals on the London Metal Exchange. Benchmark copper rose two per cent to U$7,860.75 tonne. Nickel gained 4.4 per cent, aluminium 1.3 per cent, zinc 0.3 per cent and tin 0.2 per cent. Lead shed 1 per cent.

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