The Overnight Report: Seoul & Paris In Focus

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Markets’ focus is on South Korea and France today as political risks have erupted in both countries.

In a surprise move, President Yoon Suk Yeol declared emergency martial law in a surprise televised address, citing threats from “anti-state activities” and pro-North Korean factions. That decision was later on revoked by parliament in an emergency sitting.

The South Korean authorities have said they will provide unlimited liquidity to markets if needed. In France, president Macron is battling a no confidence vote in parliament.

World Overnight
SPI Overnight	8499.00	– 23.00	– 0.27%
S&P ASX 200	8495.20	+ 47.30	0.56%
S&P500	6049.88	+ 2.73	0.05%
Nasdaq Comp	19480.91	+ 76.96	0.40%
DJIA	44705.53	– 76.47	– 0.17%
S&P500 VIX	13.30	– 0.04	– 0.30%
US 10-year yield	4.22	+ 0.03	0.64%
USD Index	106.32	– 0.01	– 0.01%
FTSE100	8359.41	+ 46.52	0.56%
DAX30	20016.75	+ 83.13	0.42%

By Chris Weston, Head of Research, Pepperstone

Good morning.

We turn the page on what has been a low energy session, with very calm conditions seen across markets, with only crude, Nat gas and copper showing any kind of real pulse.

A reflection of the lack of any tangible news to inspire fresh positioning, with a hotter US JOLTS report or the confirmation on the timing of the French no-confidence vote failing to set off any real gyrations.

The event risk kicks into gear later this week and into mid-December, with US NFP (Friday), US CPI (11 Dec), China’s Central Work Economic Conference (11-12 Dec), before we hear from the 8 or so G10 central banks who meet between 11-19 Dec.

Subsequently, these current sleepy conditions may not last for long.

On the day, we see a limited net change in any of the US equity bourses, with the S&P500 cash index tracking an 18-handle high-low trading range.

Participation and volume aside, the set-up in the S&P500 and NAS100 suggests both equity indices look exhausted, with a clear case of buyer’s fatigue.

The market is heavily long of US equity in both cash equity and futures, and while we must be open-minded that a goldilocks (i.e. improved but not too hot) US services ISM (in the session ahead), and NFP report could reinvigorate the bulls for one last push higher into year-end, there is also the risk of a low vol grind, with traders taking whatever scraps they can get from selling S&P500 (and single stock) calls to enhance the returns in equity.

In the Treasury market, we’ve seen long-end Treasury yields moving 4bp higher, with the 2yr unchanged, resulting in a 4bp steep curve.

It remains very orderly in rates and bonds and perhaps the lack of volatility here is spilling over into more chilled conditions in other asset classes.

The lack of any real trend in US rates/Treasuries sees the USD index (DXY) little changed, with EURUSD (+0.1%) the core contributor to that lack of move in the DXY.

AUDUSD also gets some attention today, with Aussie Q3 GDP on the docket, although I’m personally hesitant to think the GDP print causes any real life in the AUD, as GDP is as backwards as it gets and traders are trying to model growth in Q4, if not Q12025.

The market looks for Q3 GDP of 0.5% q/q / 1.1% y/y, and it would likely need to be a sustainable miss/beat to get AUDUSD moving, as we see in the daily set-up, the exchange rate looks very comfortable in a 0.6550 to 0.6450 range.

In commodity markets, we’ve seen life in crude, copper, and Nat Gas. Brent futures have seen a solid low-high trend day and sit +2.5% higher.

OPEC-plus may be holding off from any changes to output for a few months but talk of US-imposed sanctions on Iranian output has been a trigger for the buyers to take price into US$73.93/bbl.

One swallow does not make a Summer, and we’ll need new news to get crude into any kind of trending conditions and a quick look at the higher timeframes shows that Brent crude is still very comfortable in its US$75.00 to US$70.70 and these levels define the risk.

With the leads or the lack of them, our calls for the Asia cash equity open suggest a largely unchanged unwind the economic data due out through Asia shouldn’t trouble equity to any great extent, so making a call on the ongoing direction of travel is tough, and we’re fully at the mercy of portfolio flows.

The obvious target for the ASX200 bulls is to push for a daily close above 8500, but that may take a solid effort from both the banks and materials plays.

On the calendar today:

-Australia 3Q GDP

-Australia Nov PMI

-China Caixin China PMI

-Eurozone Oct PPI

-US Nov ADP

-Global PMIs

-Synlait Milk ((SM1)) AGM

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

Corporate news in Australia:

-China has banned exports to the US for several materials with high-tech and military applications, a tit-for-tat move after President Joe Biden’s government escalated technology curbs on Beijing

-China Investment Corporation is selling a large block of Goodman Group ((GMG)) shares worth $1.9bn

-Auckland Council is set to sell a significant stake in Auckland International Airport ((AIA))

-Origin Energy ((ORG)) is seeking a partner for its Yanco Delta wind farm project

-ASIC extends its contract with Nuix ((NXL)) despite ongoing legal proceedings

Spot Metals,Minerals & Energy Futures
Gold (oz)	2664.61	+ 4.50	0.17%
Silver (oz)	31.51	+ 0.54	1.73%
Copper (lb)	4.20	+ 0.05	1.32%
Aluminium (lb)	1.18	+ 0.00	0.19%
Nickel (lb)	7.24	+ 0.15	2.14%
Zinc (lb)	1.40	+ 0.01	0.55%
West Texas Crude	69.98	+ 1.93	2.84%
Brent Crude	73.64	+ 1.81	2.52%
Iron Ore (t)	105.32	0.00	0.00%

The Australian share market over the past thirty days

Index	03 Dec 2024	Week To Date	Month To Date (Dec)	Quarter To Date (Oct-Dec)	Year To Date (2024)
S&P ASX 200 (ex-div)	8495.20	0.70%	0.70%	2.73%	11.91%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
AVJ	AV Jennings	Downgrade to Hold from Buy	Bell Potter
CCX	City Chic Collective	Downgrade to Sell from Hold	Bell Potter
DEG	De Grey Mining	Downgrade to Speculative Hold from Speculative Buy	Bell Potter
GQG	GQG Partners	Downgrade to Neutral from Buy	UBS
HUB	Hub24	Downgrade to Hold from Accumulate	Ord Minnett
IGO	IGO Ltd	Upgrade to Neutral from Sell	UBS
IMD	Imdex	Downgrade to Neutral from Buy	UBS
JDO	Judo Capital	Downgrade to Hold from Add	Morgans
MTS	Metcash	Upgrade to Buy from Neutral	Citi
QBE	QBE Insurance	Downgrade to Hold from Buy	Bell Potter
SDF	Steadfast Group	Upgrade to Overweight from Equal-weight	Morgan Stanley
SGR	Star Entertainment	Downgrade to Underperform from Neutral	Macquarie
SHV	Select Harvests	Upgrade to Buy from Accumulate	Ord Minnett
		Upgrade to Buy from Neutral	UBS
WBC	Westpac	Upgrade to Buy from Neutral	UBS
		Downgrade to Reduce from Hold	Morgans

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.)

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