Dollar, commodities surge, US dips

Aussie shares look set to open lower as surging commodity costs are actually 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 0.5 a cent. US stocks finished mixed. Iron ore soared five per cent to a fresh multi year high. Crude oil cracked US$fifty 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 first losses to complete five points or 0.13 per dollar of the red.

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

Hopes for a stimulus buy waxed as well as waned. Treasury Secretary Steven Mnuchin said talks had made “a lot of progress”. Democrat House Speaker Nancy Pelosi agreed there had been “great progress”. But 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 conclusion of the season, you could certainly have a risk-off move 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 significantly even worse as opposed to the 730,000 expected by economists polled by Dow Jones.

“Given the recent behaviour of initial claims, we’ll probably see even more increases in ongoing claims going forward,” Thomas Simons, money market economist at Jefferies, wrote. “Evidence has been building indicating that claims arrive at an inflection point in early November thanks to rising COVID case numbers and forced the imposition of social distancing policies that really damage the service segment of the economy.”

Australian outlook
A genuine mixed bag for localized investors this morning. Lots of plenty and positives plenty of negatives. Is like a sharp split ahead involving losers as well as winners.

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

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

Today 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 area currency is traded by a lot of forex players like a standard commodity proxy.

Other negatives? The rise in iron ore was triggered by a cyclone off the Pilbara coast. Any damage or even stoppages at local producers would dent share rates. Wall Street finished broadly lower. Oddly, the US supplies 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 cent for the month despite yesterday’s 0.7 per cent setback.

So the playbook for the day appears something like this: positive leads for miners, oilers and importers ; negative leads for other exporters as well as businesses that generate 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 bad news from Tropical Cyclone Damien, iron ore majors BHP, rio Tinto as well as Fortescue appear set for fresh multi-year/record highs. BHP’s US-listed stock placed on 2.78 per cent and its UK listed inventory 3.17 a 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 purchase price has today gone parabolic & looks vulnerable if Tropical Storm Damien passes with no incident.

“The market is actually within disequilibrium right now – investors are actually trading manufacturing metals like iron ore as a speculative play on how China’s economy is going to perform,” Atilla Widnell of Navigate Commodities told Bloomberg. “There isn’t any way iron ore can 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 be a green light from the US regulator for Pfizer’s Covid 19 vaccine. Gold for February delivery settled $1.10 or perhaps under 0.1 per dollar weaker at US$1,837.40 an ounce. The NYSE Arca Gold Bugs Index edged up 0.32 a cent.

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

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