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Dollar, commodities surge, US dips

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

ASX SPI200 index futures fell thirty six points or even 0.5 a cent. US stocks finished mixed. Iron ore soared five 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 the highest level of its since June 2018.

Wall Street
US stocks struggled from 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 five points or maybe 0.13 per dollar in the red.

The Dow Jones Industrial Average traded each side of 30,000 for most of the session before doing seventy points or maybe 0.23 per dollar weaker at 29,999. Strength in’ stay at home’ stocks lifted the Nasdaq Composite 67 points or 0.54 every cent.

Hopes for a stimulus deal waxed as well as waned. Treasury Secretary Steven Mnuchin stated talks had made “a plenty of progress”. Democrat House Speaker Nancy Pelosi agreed there had been “great progress”. Yet Republican Senate Majority Leader Mitch McConnell’s office indicated Senate Republicans will not support the most recent proposal. The Senate whip John Thune predicted a deal would have to wait until next year.

“If we do not get stimulus by the tail end of the year, you can definitely 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 very last week, topping 800,000 for the first time since October. The total was significantly even worse in comparison to the 730,000 expected by economists polled by Dow Jones.

“Given the recent behaviour of initial statements, we will 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 hit an inflection point in early November because of to rising COVID case numbers and forced the imposition of social distancing policies that truly damage the service sector of the economy.”

Australian outlook
A genuine mixed bag for regional investors this early morning. A lot of positives as well as plenty lots of negatives. Is like a sharp split forward involving winners as well as losers.

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

Energy stocks outperformed in the US, rising 2.9 a cent. tech stocks and Financials also rose, 2 more pluses for our market. Wall Street finished well off its low – another plus.

Today to the negatives. 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 many forex players as a traditional commodity proxy.

Other negatives? The increase in iron ore was caused by a cyclone from the Pilbara coast. Any damage or stoppages at local producers would dent share rates. Wall Street completed broadly lower. Oddly, the US supplies sector fell 0.7 per cent. Seven straight gains has left the ASX looking vulnerable to even more 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 like this: positive leads for miners, importers and oilers ; negative leads for other exporters as well as firms that create significant 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 which is bad 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 inventory 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 price has now gone parabolic & looks weak if Tropical Storm Damien passes with no incident.

“The market place is actually in disequilibrium right now – investors are trading manufacturing 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 isn’t a way iron ore can be for US$150 based on demand and supply fundamentals.”

Gold dipped for a second day in front of what is anticipated to become 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 information is actually bearish for gold,” Chintan Karnani, chief industry analyst at Insignia Consultants, told MarketWatch.

Copper and nickel set the pace during a good night for manufacturing metals on the London Metal Exchange. Benchmark copper rose two 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 a cent. Lead shed 1 a cent.

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