The Overnight Report: Here We Go

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By Greg Peel

The Dow closed up 72 points or 0.4% while the S&P rose 0.6% to 2143 and the Nasdaq added 0.8%.

The Calm

The ASX200 did spike up 30 points on the open yesterday which is hardly surprising given a near 400 point rally in the Dow. But given Australia had responded previously to the FBI news there was no reason to double-count, particularly given the election is yet to be won.

We thus drifted off the opening high in the morning and drifted lower again, back to flat, after the release of China’s October trade data, and there we stayed, ahead of today’s shenanigans.

China’s exports fell 7.7% year on year in October, more than the forecast of a 6.0% drop but less than September’s 10.0% drop. Imports fell 1.4%, more than the forecast of 1.0% but less than September’s 1.9%.

Notably, imports of iron ore, coal and oil were all lower in October than September, likely reflecting surging prices, particularly for coal.

And on that subject, in an effort to crack down on a surge in commodity speculation, three Chinese futures exchanges offering contracts in coking and thermal coal and steel products  last night increased the margins required to be paid to buy those futures contracts, news service MNI has reported.

As a result, thermal and coking coal prices fell 5% and 6% respectively in China, albeit ex-China thermal coal is up 2.5% and iron ore is also up another 1.5%.

As to how the Australian mining sector will respond today is unclear. Beijing is fighting against itself if on the one hand it is attempting to constrain coal production, and on the other is trying to constrain coal price speculation.

The Storm

Wall Street opened a tad lower last night following its big Clinton-driven rebound on Monday night but around 11am when the very, very early election numbers started to trickle in, the Dow shot up 150 points. Once upon a time we would have just waited till the polls had closed to speculate on a result but in this day and age of instantaneous information dissemination, every little fluctuation is being acted upon.

And so it was that news of a Trump court challenge to early voting at a couple of booths in Latino areas had Wall Street drifting back down, until the judge threw out the challenge and Wall Street went back up again. It is probably fortunate the markets actually close before the real numbers start to roll in.

Although futures markets continue to trade, and downunder all focus will no doubt be on the rolling results and on the response in those futures markets throughout the day.

There’s not much more that can be said at this point.

Commodities

West Texas crude is unchanged at US$44.86/bbl.

Copper has technically broken to the upside, and added another 2.5% last night, with short-covering likely now in play. Lead was also up 2% and nickel 1%.

Iron ore rose US$1.00 to US$67.80/t.

The US dollar index had ticked another 0.1% higher to 97.87 but the Aussie is on a tear, adding another 0.7% to US$0.7767 on both Clinton relief and commodity price strength.

Gold is down US$4.50 at US$1281.10/oz.

Today

The SPI Overnight closed up 24 points or 0.5%. As to how accurate this proves will come down to the rolling election results throughout the session and also to how much the market has already baked in a Clinton victory. One has to assume the risk is weighted to the downside, with not a lot more room on the upside on the election in isolation.

China will release October inflation numbers today while locally, Westpac will publish its monthly consumer confidence survey.

No major local earnings results today but a lot of AGMs, including those of Commonwealth Bank ((CBA)), following yesterday’s so-so result, Flight Centre ((FLT)), following its profit warning last week, Fortescue Metals ((FMG)) and Ramsay Health Care ((RHC)).
 

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