The Overnight Report: And So It Begins…

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Traders and investors have been reminded about Trump’s social media posts as a source for instant market volatility.

The local market is expected to open higher, with resources stocks lagging.

World Overnight
SPI Overnight	8428.00	+ 41.00	0.49%
S&P ASX 200	8359.40	– 58.20	– 0.69%
S&P500	6021.63	+ 34.26	0.57%
Nasdaq Comp	19174.30	+ 119.46	0.63%
DJIA	44860.31	+ 123.74	0.28%
S&P500 VIX	14.10	– 0.50	– 3.42%
US 10-year yield	4.30	+ 0.04	0.87%
USD Index	106.92	+ 0.08	0.07%
FTSE100	8258.61	– 33.07	– 0.40%
DAX30	19295.98	– 109.22	– 0.56%

By Chris Weston, Head of Research, Pepperstone

Good morning.

The theme on the day has been to buy America, and for some to begrudgingly open a Truth Social account, with confirmation that headline risk and the communication channels for price discovery in markets have officially evolved.

As has now been widely discussed, Trump sent out a message of intent to those nations stepping up to the negotiation table, rolling out his first executive order in quick fashion.

The incoming orders to place 25% tariffs on all Canadian and Mexican goods, and an additional 10% on all Chinese goods, showcase Trump 2.0 as a more vastly entity than 2016.

He is far more prepared, has a clear game plan, and has the legal passage to execute without constraint with much of his cabinet largely now in place.

Markets now expect bold action ongoing, with the noise in markets officially increasing even before inauguration.

And, while the tariffs on China are still well under the levels he campaigned on, the actions on the day suggest a probability they will be incrementally taken there over time, as his rationale for tariffs was not about trade deficits, but narcotics and this suggests tariff increases can be put forward for a multitude of reasons.

Looking at the reaction around markets, one consideration is that there has been no impact in US inflation expectations US 2yr breakeven inflation rates are unchanged, while the more forward-looking US 5Y5Y inflation swap is -3bp lower.

This may evolve, and we know that the Fed will be watching market measures of expected inflation very closely, so the lack of change on the day is a small positive for risk.

There have been pockets of selling across the US Treasury curve, with yields in the 5-7yr maturities 2bp higher although, whether that is tariff-related is debatable.

One could argue that US Treasuries have been held back from rising further by a solid 5yr Treasury auction, as well as the uninspiring US economic data flow seen from new home sales (-17.3% m/m), Philadelphia Fed services (-5.9) and an inline US consumer confidence print (111.7).

The USD was the clearest expression of trade tariffs

AUDUSD has been well traded as a China proxy, and it’s been a whippy ride intraday, with the spot rate initially trading lower into .6434 on the news, but subsequently reversing back to 0.6507 in early US trade.

Similar to the intraday tape of EURUSD, there’s been a gradual wave of USD buyers through US trade, with both AUDUSD and EURUSD grinding lower through the US session.

Event risk for the session ahead

Discounting tariffs aside, traders will need to keep a vigil and potentially react to the deluge of data and central bank risk in the session ahead.

Aussie Oct CPI get the data risk going (at 11:30 AEDT), with expectations we see headline push to 2.3% y/y, where the outcome could impact the AUD, certainly against the FX cross rates.

Today’s RBNZ meeting (12:00 AEDT) should result in a -50bp rate cut, although there is a small chance they go -75bp.

In the US, we see durable goods, weekly jobless claims, personal income/spending, and core PCE inflation.

In equity land, traders ease into the holiday spirit, with the S&P500 tracking a tight 26-point high-low range on the day – half the YTD average.

That said, US large-cap equity has seen gains with the S&P500 +0.6% with the index closing at session highs showing the control held by the bulls.

US Small caps have lost ground, with the Russell 2k -0.7%, with funds rotating into large-cap defensives, where notably utility, comm services and staples are working.

The ASX200 to lead Asia higher

The ASX200 should be pushing back above 8400, although the upside will be held back by materials and energy plays.

In commodity markets, we see copper -0.7%, with crude -0.5% and gold +0.3%, with no significant reaction to confirmation that the Israeli Security Cabinet had approved a ceasefire suggesting the outcome was largely discounted.

On the calendar today:

-RBNZ cash rate

-Australia Oct CPI

-China Oct Ind Profits

-US 3Q GDP

-US 3Q PCE

-US Oct Personal Spending

-ALS Ltd ((ALQ)) ex-div 18.90c (30%)

-GrainCorp ((GNC)) ex-div 24.00c (100%)

-Gentrack Group ((GTK)) earnings report

-HMC Capital ((HMC)) AGM

-Harvey Norman ((HVN)) AGM

-Liontown Resources ((LTR)) AGM

-Lynas Rare Earths ((LYC)) AGM

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

Corporate news in Australia:

-Carnaby Resources ((CNB)) is raising $15m to fund the acquisition of the Trekelano copper mine

Spot Metals,Minerals & Energy Futures
Gold (oz)	2657.66	+ 5.71	0.22%
Silver (oz)	30.98	+ 0.16	0.53%
Copper (lb)	4.13	– 0.04	– 0.96%
Aluminium (lb)	1.18	– 0.02	– 1.54%
Nickel (lb)	7.20	– 0.09	– 1.17%
Zinc (lb)	1.38	+ 0.02	1.75%
West Texas Crude	68.66	– 0.42	– 0.61%
Brent Crude	72.17	– 0.44	– 0.61%
Iron Ore (t)	102.01	0.00	0.00%

The Australian share market over the past thirty days

Index	26 Nov 2024	Week To Date	Month To Date (Nov)	Quarter To Date (Oct-Dec)	Year To Date (2024)
S&P ASX 200 (ex-div)	8359.40	-0.41%	2.44%	1.08%	10.13%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
ADH	Adairs	Upgrade to Buy from Hold	Bell Potter
GQG	GQG Partners	Downgrade to Hold from Add	Morgans
IAG	Insurance Australia Group	Downgrade to Accumulate from Buy	Ord Minnett
LOV	Lovisa Holdings	Upgrade to Hold from Lighten	Ord Minnett
MIN	Mineral Resources	Upgrade to Neutral from Sell	Citi
MP1	Megaport	Downgrade to Hold from Accumulate	Ord Minnett
PGC	Paragon Care	Upgrade to Buy from Accumulate	Ord Minnett
		Downgrade to Hold from Buy	Bell Potter
RSG	Resolute Mining	Downgrade to Hold from Accumulate	Ord Minnett
WTC	WiseTech Global	Upgrade to Outperform from Neutral	Macquarie
		Upgrade to Add from Hold	Morgans
		Upgrade to Accumulate from Hold	Ord Minnett

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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