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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 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 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 of claims for jobless benefits underlined strains on the economy. The S&P 500 pared first losses to finish five points or maybe 0.13 per cent in the red.

The Dow Jones Industrial Average traded each side of 30,000 for a great deal of the session prior to doing 70 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 0.54 every 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 latest proposal. The Senate whip John Thune predicted a deal would have to hold back until next year.

“If we do not get stimulus by the conclusion of the year, you could most 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 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 latest behaviour of initial claims, we’ll likely see even more increases in ongoing claims going forward,” Thomas Simons, cash market economist at Jefferies, wrote. “Evidence has been building indicating that claims reach an inflection point in early November because of to rising COVID case numbers and forced the imposition of social distancing policies that really damage the service sector of the economy.”

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

First, the positives. Iron ore soared $7.50 or 5 per cent to US$158.25 a tonne, an eight-year peak, according to CommSec. Brent crude settled $1.39 or 2.8 per dollar higher at US$50.25 a barrel, the first close of its above US$fifty since the early days of the pandemic sector plunge.

Energy stocks outperformed in the US, rising 2.9 per cent. tech stocks as well as Financials also rose, two more pluses for our industry. Wall Street finished well off its great – 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 local 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 from the Pilbara coast. Any damage or stoppages at local producers would dent share prices. Wall Street finished broadly lower. Oddly, the US materials sector fell 0.7 per cent. Seven 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 appears something such as this: good leads for miners, importers and oilers ; negative leads for various exporters as well as firms 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 bad news from Tropical Cyclone Damien, iron ore majors BHP, rio Tinto and Fortescue look 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 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 purchase price has today gone parabolic and looks weak if Tropical Storm Damien passes without incident.

“The market place is actually within disequilibrium right now – investors are actually trading industrial metals as 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 any way iron ore might be for US$150 based on demand and supply fundamentals.”

Gold dipped for a second day ahead 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 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 good 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 as well as tin 0.2 per cent. Direct shed one a cent.

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