The Overnight Report: Positive Start Ahead

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Having suffered a negative session yesterday, SPI futures are signalling a day of recovering share prices for the local bourse on Thursday.

US equities made late gains, with the S&P500 index and the Dow Jones ending with small gains and the Nasdaq100 index coming up short on the day.

It was a similar story in Europe with the Euro Stoxx 50 closing down -0.1% and the FTSE100 up 0.1%.

Long-end bond yields rose in most major European markets, with the yield on the US 10y bond also edging up 1bp to 4.44%.

Oil prices were largely steady, with WTI futures down -0.3%, trading at USD68.1/bbl. Gold was down -0.9%, trading at USD2,583.1/oz.

By Chris Weston, Head of Research, Pepperstone

Good morning.

Trends in price tell a story of the aggregation of flow and offers insight into sentiment towards a market, and there are strong trends playing out across markets right now and which continue to work.

When it comes to trends, the USD is front and centre here, and while US core CPI print (+0.3% m/m) did bring out buyers in the US 2yr Treasury (-7bp on the day) and offered interest rate traders increased conviction that the Fed will ease again in the December meeting, the USD index (DXY) pushes to 12-month highs and continues its strong run of form seen since late September.

The USD is a magical currency

The USD is a magical currency backed by carry, momentum, growth differentials, impending fiscal and tariff kickers.

While trends don’t last forever, until US economics start to break down, it’s likely that an increasingly rich USD position proves to be the primary factor that could cause a tradeable selloff.

AUDUSD breaks down and tests big support levels seen in August. The AUD may get support from rates pricing that imply the RBA sitting on their hands through to May, even July.

However, with better sellers in the Chinese yuan, and fragility in China/HK equity, this is the more dominant driver of AUD flows.

In the session ahead, Aussie Oct employment data could prove to be a short-term volatility event, where I would argue that a poor jobs report would cause a greater downside reaction to the AUD, than the effects a strong jobs number would have on an upside move.

Gold breaking down and bear trending

Gold is also trending, but that trend is now lower and having broken the October swing lows on the day, the sellers are firmly in control.

Gold is now a sell on rallies play, but the trend is lower, and until we see price close back above the 5-day EMA, I’d be looking for US$2530/oz to come into play.  

Levels that define risk in US equity

In equity land, the S&P500 consolidates within a longer-term bull trend and oscillates around the 6000 level.

There are further signs of buyer fatigue here, and unlike the USD, the risks in the near term are more balanced and two-way.

Perhaps Nvidia’s Q325 earnings on Wednesday can kickstart the party, and while the market expects another punchy -/+8% move on the day of earnings, it’s interesting that analysts are as aligned to prior company guidance as we’ve seen in years.

The prospect, therefore, of Nvidia surprising and blowing the lights out is somewhat reduced.

I am defined by the price action and while valuation in US large-cap equity is becoming problematic, a break above 6017 (6053 in S&P500 futures) would get the bull party started again and perhaps coincide with strong end-of-year seasonals.

Conversely, should the market take down risk and look to buy volatility, then a downside break of 5724 (S&P500 futures) would likely feed on itself and promote a further liquidation of long positions and it is a level that defines my risk.

Looking ahead and on the day our calls for Asia equity suggest a flat open, and that could offer a notable read on sentiment – as a flat unwind may not stay that way for long and how the tape plays out after the first 30 minutes could set a trend for the remainder of cash equity trade.

On the data side, Aussie jobs as detailed could get some focus, as could US PPI; inflation could cement expectations for the core PCE inflation print due on 28 November.

On the calendar today:

-Australia Oct Unemployment rate

-Eurozone 3Q GDP

-UK 3Q GDP

-US Oct PPI

-Catapult Group International ((CAT)) 1H25 earnings report

-Computershare ((CPU)) AGM

-Flight Centre Travel Group ((FLT)) AGM

-Genesis Minerals ((GMD)) AGM

-Goodman Group ((GMG)) AGM

-GrainCorp ((GNC)) earnings report

-Guzman Y Gomez ((GYG)) AGM

-Ingenia Communities Group ((INA)) AGM

-Inghams Group ((ING)) AGM

-OFX Group ((OFX)) earnings result

-Orica ((ORI)) earnings result

-Xero ((XRO)) earnings result

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

Corporate news in Australia:

-Agri-chemicals company Nufarm ((NUF)) has reported a -29% decline in underlying earnings before interest, tax and amortisation at $313m for FY24.

-Explosives manufacturer Orica ((ORI)) has recorded a statutory net profit of $525m for the full-year.

-New Zealand-based infrastructure investment company Infratil ((IFT)), on investors’ radar because of its data centre exposure, has booked its earnings before interest, tax, depreciation, amortisation, fair value for the half year at NZ$506m, a 25%increase from a year earlier.

-Mali is demanding Resolute Mining ((RSG)) pay about $160m to resolve a tax dispute after the government detained the Australian gold producer’s chief executive

-Mineral Resources will temporarily shut down its Bald Hill lithium mine due to low lithium prices

-Selfwealth ((SWF)) has received a $51m takeover offer from Bell Financial Group ((BFG))

-EQT Holdings ((EQT)) is looking to sell at least a 25% stake in Metlifecare

By Nigel Green, CEO of deVere Group

Emerging markets are teetering on the edge of a financial storm as Trump’s return to the White House is fuelling a massive dollar rally that could wreak havoc on developing economies.

The Dollar Index, which tracks the US currency against a basket of peers, was up 0.4% for the day.

As the dollar strengthens on the back of looming Trump policies on Chinese imports, economies across Asia, Latin America, and beyond are staring down a wave of currency devaluations, inflation spikes, and economic instability.

Investors are already seeing echoes of 2016, but this time, the stakes are even higher.

Trump’s renewed America First agenda could mean unprecedented tariffs on China, potentially up to 60%.

Such heavy-duty tariffs would likely trigger a dramatic plunge in the renminbi, with devastating ripple effects across emerging markets.

When China’s currency falls, it drags down other emerging market currencies with it, creating a domino effect of depreciations across the developing world.

For dollar-pegged economies like Argentina, Egypt, and Turkey, the fallout could be particularly catastrophic as they face the risk of explosive devaluations, uncontrollable inflation, and the threat of full-blown financial crises.

Emerging markets are also in the crosshairs of Trump’s trade policy.

As the dollar continues its upward trajectory, emerging markets are bearing the brunt of this shift. With most global trade priced in dollars, these economies face rising costs for imports, skyrocketing inflation, and an increased burden on their dollar-denominated debt.

The challenge isn’t limited to just one region. Asian economies, Latin America, and African markets alike are vulnerable to currency plunges, inflation hikes, and investor flight if the dollar surge continues unabated.

For commodity-exporting nations, a stronger dollar also spells weaker global demand, pushing commodity prices down and squeezing their economies even further. This scenario threatens everything from growth rates to employment stability across these markets.

Investors looking to emerging markets for growth may soon find themselves dealing with a drastically altered investment landscape as the dollar steamrolls through these fragile economies.

The effects of a dollar surge go beyond just currency devaluations. Local currency debt markets in emerging economies are facing mounting pressure as interest rates climb, driven by the global scramble to keep up with the appreciating dollar.

As borrowing costs soar, these countries will be forced to choose between defending their currencies and sustaining growtha dilemma that has the potential to destabilize economies in the process.

Without flexible exchange rates, these countries may see their economies hit hard by tightening financial conditions that they can no longer control.

For global investors, the implications are clear: emerging markets are poised for significant volatility as the dollar strengthens.

The next chapter of this economic story is starting, and for those prepared, it holds remarkable potential.

A well-positioned portfolio could leverage these shifts, unlocking new gains in a world where the dollar dictates the rules.

The Australian share market over the past thirty days

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

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