The Overnight Report: Not Convinced

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SPI futures are pointing towards another weak opening for the ASX today.

World Overnight
SPI Overnight	8160.00	– 48.00	– 0.58%
S&P ASX 200	8168.20	– 141.20	– 1.70%
S&P500	5867.08	– 5.08	– 0.09%
Nasdaq Comp	19372.77	– 19.93	– 0.10%
DJIA	42342.24	+ 15.37	0.04%
S&P500 VIX	24.09	– 3.53	– 12.78%
US 10-year yield	4.57	+ 0.08	1.69%
USD Index	108.10	+ 0.30	0.28%
FTSE100	8105.32	– 93.79	– 1.14%
DAX30	19969.86	– 272.71	– 1.35%

Good morning.

US equities staged a cautious recovery, led by defensives, as traders and investors await today’s triple witching session during which three types of derivates expire, usually delivering significant impact on the day’s volumes and price action.

Today’s quarterly “triple-witching” will see some US$6.5trn worth of options tied to individual stocks, indexes and exchange-traded funds fall off the board.

It is reportedly this year’s largest and among the biggest on record, though still slightly smaller than a year ago.

The US bond market paring back rate cut forecasts for 2025 is still reverberating across global markets.

The BoE kept policy rate unchanged, the 6:3 voting split showing concern about weak activity.

The BoJ held policy rate steady, citing the need for more data to be confident of inflation outlook.

In Europe, the Euro Stoxx 50 and the FTSE 100 closed down -1.6% and -1.1%, respectively.

The yield on the US 10y Treasury rose 7bp to 4.58%, the highest level since May. Oil prices eased, with WTI futures down -0.8% to trade at USD70/bbl. Gold staged a come-back.

The AUD/USD trimmed losses but remains in the 0.62 range.

Chris Weston, Head of Research, Pepperstone, reports US equity has certainly calmed after the 3.5 standard deviation sell-off seen yesterday in reaction to the Fed meeting, with the S&P500 closing -0.1% and NAS100 -0.5%, with the VIX index retreating 3.5 vols to 24.09%.

That said, while we haven’t seen any aggressive follow-through selling in the US indices, the price action is unconvincing, and we see choppy intraday conditions.

At a sector level Utilities outperform, with banks and tech also finding buyers, while REITs, Energy and Materials are lower on the day. 

After yesterday’s sell-off, many question if a seasonal rally in the US and other DM equity is still a possibility.

If we blend 15 years of S&P500 daily returns into one smoothed chart, we see that historically it is from today that the S&P500 (and by extension other US indices) have rallied into year-end.

Had you asked me yesterday if this seasonal form was to set to repeat, I’d have been highly skeptical, but the fact there hasn’t been any further major follow-through selling suggests it is still a possibility.

Naturally, no one knows where the markets will go in the short term, but we must remain open-minded, as the flows can get a little funky at this time of year, and market moves are not always easily explained by the news flow.

In economic data, US initial jobless claims for week ended 14 December edged lower to 220k vs 242k before.

On a four-week moving average basis, initial claims have increased modestly, but remain around the pre-pandemic levels.

The third release of US GDP saw headline growth revised higher to 3.1% q/q annualised vs 2.8% previously, with higher personal consumption (+3.7% vs +3.5%) being the key driver.

Economists at ANZ Bank report the risk-off tone weighed on sentiment in base metal markets.

Copper led the sector lower as investors baulked at the prospect of a stronger USD and higher financing costs that could hurt demand.

Nickel was caught up in the selloff despite signs that low prices are finally having their impact on supply.

Indonesia is said to be considering deep cuts to nickel mining quotas as it seeks to boost slumping prices of the metal.

As the world’s largest nickel producers, it is looking to lower the amount of nickel mined next year to 150mt, according to a Bloomberg report.

That would be a sharp drop from the 272mt that will be produced in 2024.

Indonesia built its massive nickel industry on the prospect of electric vehicle growth. However, the wave of new supply has overwhelmed the high levels of demand growth.

Any move to restrict nickel mining by President Prabowo Subianto could still be challenged by the finance and investment ministries due to the hit to tax revenue.

SPI futures are suggesting another weak opening for the local bourse today.

On the calendar today:

-New Zealand ANZ consumer confidence

-New Zealand Nov trade balance

-Japan Nov CPI

-UK Nov retail sales

-US Dec Uni of Mich

-US Nov PCE

-US Personal income/spending

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

Corporate news in Australia:

-News Corp ((NWS) reportedly close to announcing Foxtel deal with DAZN

-Woodside Energy ((WDS)) to swap Australian operating assets with Chevron

-Champion Iron ((CIA)) has partnered with Nippon Steel and Sojitz to jointly develop its Kamistiatusset iron ore mine in Canada

-Paladin Energy ((PDN)) gains approval for Fission Uranium acquisition, secures TSX listing

-Transurban ((TCL)) may face significant financial penalties following a Supreme Court of Victoria ruling related to a legal dispute with ConnectEast

Spot Metals,Minerals & Energy Futures
Gold (oz)	2613.29	+ 4.75	0.18%
Silver (oz)	29.57	– 0.38	– 1.28%
Copper (lb)	4.09	– 0.01	– 0.25%
Aluminium (lb)	1.13	– 0.01	– 0.47%
Nickel (lb)	7.14	0.00	0.00%
Zinc (lb)	1.34	– 0.01	– 1.07%
West Texas Crude	69.11	– 0.34	– 0.49%
Brent Crude	72.56	– 0.41	– 0.56%
Iron Ore (t)	104.08	– 0.65	– 0.62%

The Australian share market over the past thirty days

Index	19 Dec 2024	Week To Date	Month To Date (Dec)	Quarter To Date (Oct-Dec)	Year To Date (2024)
S&P ASX 200 (ex-div)	8168.20	-1.54%	-3.18%	-1.23%	7.61%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
PER	Percheron Therapeutics	Downgrade to Speculative Hold from Buy	Bell Potter
SIG	Sigma Healthcare	Upgrade to Add from Hold	Morgans
SPK	Spark New Zealand	Downgrade to Equal-weight from Overweight	Morgan Stanley
SRG	SRG Global	Downgrade to Accumulate from Buy	Ord Minnett
TYR	Tyro Payments	Downgrade to Underweight from Equal-weight	Morgan Stanley

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

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author’s and not by association FNArena’s – see disclaimer on the website)

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