Daily Market Reports | Dec 11 2024
This story features TREASURY WINE ESTATES LIMITED, and other companies. For more info SHARE ANALYSIS: TWE
US Equities had a weak session, but nothing like the growth stocks sell-off that occurred on the ASX yesterday.
Instead, go figure, materials stocks were sold down overnight.
SPI futures are suggesting a modestly weaker opening for the local bourse on Wednesday.
The Euro Stoxx index closed down -0.7% while the FTSE100 fell -0.9%. The yield on the US 10-yr note rose 3.5bp to 4.22%. Oil was firmer with WTI up 0.9% to USD68.6/bbl. Gold rose 0.8% to USD2,692/oz.
| World Overnight | |||
| SPI Overnight | 8401.00 | – 9.00 | – 0.11% |
| S&P ASX 200 | 8393.00 | – 30.00 | – 0.36% |
| S&P500 | 6034.91 | – 17.94 | – 0.30% |
| Nasdaq Comp | 19687.24 | – 49.45 | – 0.25% |
| DJIA | 44247.83 | – 154.10 | – 0.35% |
| S&P500 VIX | 14.40 | + 0.21 | 1.48% |
| US 10-year yield | 4.22 | + 0.02 | 0.52% |
| USD Index | 106.10 | + 0.26 | 0.24% |
| FTSE100 | 8280.36 | – 71.72 | – 0.86% |
| DAX30 | 20329.16 | – 16.80 | – 0.08% |
By Chris Weston, Head of Research, Pepperstone
Good morning.
On the day we see that correlations have largely broken down between asset classes, with traders working orders in a far more selective manner, and markets beating to their own unique drum.
Gold breaking out of its 8-day consolidation phase
Gold stands out in this regard, with the spot price finding a strong bid through European trade, resulting in a solid low-high trend day, and pushing into US$2695/oz.
The 1.2% rally on the day coming despite a modestly stronger USD and a slight uptick in US Treasury yields.
As is the way with gold, many look for some sort of explainer, with China reserve accumulation doing the rounds, while short covering and position adjustment ahead of today’s US CPI print also makes its way into the discussion.
We can also focus on technical factors, where on Monday spot gold and gold futures pushed into the range highs in the 8-day sideways consolidation phase. It’s noticeable that when gold futures broke convincingly through Monday’s high of US$2700/oz and out of the consolidation phase, gold futures volumes really kicked up, with increased volume in the GLD ETF 20 Dec call options.
In FX markets we see a dispersion in the daily moves in major FX, with the MXN and BRL outperforming, while the AUD and NZD have lost ground.
Sellers in both Antipodean currencies are taking steer from the rollover in the price action and lack of follow-through buying in China/HK equity post the Politburo meeting, while the RBA are seemingly more open-minded about a rate cut in either February or April 2025.
Aussie interest rate swaps price some -15bp of cuts for the February 2025 RBA meeting, implying a 62% chance of a -25bp cut.
Obviously, a lot needs to fall in place for the RBA to ease in February, and the bank will need to see the next two Aussie jobs prints (including one tomorrow) come in on the soft side, with the Q4 CPI print (due 29 Jan) also needing to come in well below 2.8% y/y.
AUD and NZD will be keen to focus on the tape in the HK50 (Hong Kong) in trade, and any push higher in equity markets with China’s Central Economic Work Conference kicking into gear today.
US CPI a risk event to navigate
USD traders are set to navigate today’s US CPI print, although expectations that the inflation data will lead to pronounced moves in rates, US Treasuries and the USD are low.
With the market looking for both headline and core CPI to come in at 0.3% m/m (annualised core CPI unchanged at 3.3% y/y), we may need to see a core CPI print firmly above 0.4% m/m to get the USD pumping.
With a low bar for the Fed to ease next week, the US CPI print is unlikely to derail that outcome, although it could throw some doubt into the mix, and more importantly impact expectations and pricing towards policy changes in future Fed meetings.
Conversely, a CPI print that rounds down to 0.2% would bring out better USD sellers and could lift sentiment towards risky assets (equity).
Shortly after the US CPI print, FX traders will navigate the Bank of Canada meeting, where a -50bp cut is almost fully priced.
Turning to the Asia equity open, the leads from the US suggest modest downside for the ASX200.
The S&P500 sits near session lows, with 70% of companies in the red, with tech, REITS and materials plays underperforming.
Comms services, staples and consumer discretionary sectors sit in the green, although the discretionary sector has been driven primarily by Alphabet with the street applauding the development of its Willow quantum chip.
On the calendar today:
-New Zealand 3Q Manufacturing Activity
-Japan Nov PPI
-China Nov PPI
-US Nov CPI
FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/
Corporate news in Australia:
-Small family-owned operators are reportedly bidding for Treasury Wine Estates’ ((TWE)) non-core wine brands
-ACCC claims Regional Express ((REX)) misled the market for more than a year about its profitability before it collapsed
-ACCC approves Integral Diagnostics’ ((IDX)) proposed merger with Capitol Health ((CAJ))
-Adamantem Capital is selling its allied healthcare business, Plena, with Pacific Equity Partners and Medibank Private ((MPL)) seen as potential buyers
-Viva Leisure ((VVA)) invests in World Gym Australia to expand its fitness network
-Maas Group ((MGH)) reportedly a major contender in the auction for Buckeridge Group of Companies
-Financially troubled Mosaic Brands ((MOZ)) is closing 160 stores
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 2718.36 | + 37.47 | 1.40% |
| Silver (oz) | 32.55 | + 0.15 | 0.46% |
| Copper (lb) | 4.27 | + 0.01 | 0.24% |
| Aluminium (lb) | 1.18 | + 0.01 | 0.73% |
| Nickel (lb) | 7.11 | – 0.09 | – 1.29% |
| Zinc (lb) | 1.42 | + 0.01 | 0.70% |
| West Texas Crude | 68.40 | + 0.28 | 0.41% |
| Brent Crude | 71.94 | + 0.02 | 0.03% |
| Iron Ore (t) | 105.63 | – 0.71 | – 0.67% |
The Australian share market over the past thirty days
| Index | 10 Dec 2024 | Week To Date | Month To Date (Dec) | Quarter To Date (Oct-Dec) | Year To Date (2024) |
|---|---|---|---|---|---|
| S&P ASX 200 (ex-div) | 8393.00 | -0.33% | -0.51% | 1.49% | 10.57% |
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| 29M | 29Metals | Downgrade to Sell from Neutral | Citi |
| A11 | Atlantic Lithium | Upgrade to Outperform from Neutral | Macquarie |
| CMM | Capricorn Metals | Downgrade to Neutral from Outperform | Macquarie |
| CXO | Core Lithium | Upgrade to Neutral from Underperform | Macquarie |
| DMP | Domino’s Pizza Enterprises | Downgrade to Underperform from Neutral | Macquarie |
| IGO | IGO Ltd | Upgrade to Outperform from Neutral | Macquarie |
| MGX | Mount Gibson Iron | Downgrade to Neutral from Outperform | Macquarie |
| NHC | New Hope | Upgrade to Outperform from Neutral | Macquarie |
| NIC | Nickel Industries | Downgrade to Neutral from Outperform | Macquarie |
| PLL | Piedmont Lithium | Upgrade to Outperform from Neutral | Macquarie |
| PSQ | Pacific Smiles | Downgrade to Equal-weight from Overweight | Morgan Stanley |
| PTM | Platinum Asset Management | Downgrade to Sell from Hold | Bell Potter |
| RDG | Resource Development | Downgrade to Hold from Buy | Bell Potter |
| RMS | Ramelius Resources | Upgrade to Outperform from Neutral | Macquarie |
| SSM | Service Stream | Downgrade to Accumulate from Buy | Ord Minnett |
| SYA | Sayona Mining | Upgrade to Outperform from Neutral | Macquarie |
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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CHARTS
For more info SHARE ANALYSIS: CAJ - CAPITOL HEALTH LIMITED
For more info SHARE ANALYSIS: IDX - INTEGRAL DIAGNOSTICS LIMITED
For more info SHARE ANALYSIS: MGH - MAAS GROUP HOLDINGS LIMITED
For more info SHARE ANALYSIS: MOZ - MOSAIC BRANDS LIMITED
For more info SHARE ANALYSIS: MPL - MEDIBANK PRIVATE LIMITED
For more info SHARE ANALYSIS: REX - REGIONAL EXPRESS HOLDINGS LIMITED
For more info SHARE ANALYSIS: TWE - TREASURY WINE ESTATES LIMITED
For more info SHARE ANALYSIS: VVA - VIVA LEISURE LIMITED