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Dollar, commodities surge, US dips

Aussie shares look set to open lower as surging commodity price tags 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 thirty six points or perhaps 0.5 a cent. US stocks finished mixed. Iron ore soared 5 per cent to a fresh multi-year high. Crude oil cracked US$fifty a barrel for the first time since March. The dollar climbed to its highest level 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 0.13 per dollar of the red.

The Dow Jones Industrial Average traded both sides of 30,000 for a great deal of the session prior to finishing seventy points or perhaps 0.23 per dollar weaker at 29,999. Strength in’ stay at home’ stocks lifted the Nasdaq Composite 67 points or perhaps 0.54 per cent.

Hopes for a stimulus deal waxed and waned. Treasury Secretary Steven Mnuchin stated talks had made “a lot 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 up proposal. The Senate whip John Thune predicted a deal would have to hold off until next year.

“If we do not get stimulus by the conclusion 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 claims, we’ll likely see additional increases in continuing 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 because of to rising COVID case numbers and forced the imposition of social distancing policies that truly hurt the service sector of the economy.”

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

To begin with, 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 even 2.8 per cent higher at US$50.25 a barrel, the first close of its above US$50 since the early days of the pandemic market plunge.

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

These days to the negatives. Those stellar profits 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 classic commodity proxy.

Other negatives? The increase in iron ore was triggered by a cyclone off the Pilbara coast. Any harm or even stoppages at local producers would dent share prices. 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 further 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 looks something like this: good leads for miners, oilers and importers ; negative leads for other exporters and 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 bad news from Tropical Cyclone Damien, iron ore majors BHP, Fortescue as well as rio Tinto look set for fresh multi-year/record highs. BHP’s US-listed inventory put 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 today gone parabolic and looks vulnerable if Tropical Storm Damien passes without incident.

“The market place is within disequilibrium right now – investors are trading industrial metals like iron ore as a speculative play on the best way China’s economy will perform,” Atilla Widnell of Navigate Commodities told Bloomberg. “There isn’t any way iron ore might be at US$150 based on need as well as supply fundamentals.”

Gold dipped for a second day ahead 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 under 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 info is actually bearish for gold,” Chintan Karnani, chief industry analyst at Insignia Consultants, told MarketWatch.

Copper as well as nickel set the pace during a solid night for manufacturing 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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