The Overnight Report: Prices Go Down, Down

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SPI futures are indicating a negative session to end the week in Australia, following through from weakness in US Equities.

Good morning.

Overnight, investor attention has been fixed on central banks and the November PPI release in the US.

The PPI proved much stronger than expected (up 0.4% versus 0.2% expected), a negative at face value, but the debate among economists is whether the details are less bad, and what it means exactly for monetary policy.

The European Central Bank cut its key rate by -25 basis points to 3%, and the accompanying statement was noticeably dovish in tone. The Swiss National Bank opted for a larger-than-expected -50 basis point cut.

Next week, the Fed meets, as well as policymakers at the Bank of England and Bank of Japan.

The details of the PPI release should not prevent the Federal Reserve from delivering another -25bp rate cut next week, but US equities still closed weaker.

Similar as what has been happening in Australia this week past, investors seem hesitant to push outperforming technology stocks even higher.

The Euro Stoxx 50 and the FTSE100 both rose 0.1%. The yield on the US 10y bond rose 3.9bp to 4.32%. Oil prices dipped but then recovered to be little changed, with WTI futures down -0.1% to USD70.26/bbl. Gold was down -1.1% to USD2,683.6/oz.

As highlighted by economists at ANZ Bank, nearly 60% of the rise in US final demand prices in November was due to a 0.7% m/m increase in final demand goods, while prices for final demand services (+0.2% m/m) contributed to the balance.

The rise in the price of eggs (+54.6%) accounted for 25% of the rise in final demand goods.

Within final demand services, wholesaler and retailer margins rose 0.8% m/m as outlets took advantage of the holiday season and buoyant consumers to push up margins.

For the week ended 7 December, US jobless claims rose 17k to 242k, the highest level since late July.

If repeated next week, which covers the survey week for the nonfarm payrolls report, it would point to a weak December labour market report.

The stronger PPI may not spoil the Fed party next week but it is also being perceived as yet more evidence the Fed is about to pause in its rate cutting cycle, and this apparentlyweighed on commodity prices overnight.

Industrial metals had a mixed session as China yet again indicated more stimulus is forthcoming, this time with “conviction”.

On the calendar today:

-New Zealand Nov manufacturing PPI

-Japan 4Q Tankan

-Japan Oct Industrial Production

-Eurozone Oct Industrial Production

-Liberty Financial Group ((LFG)) ex-div 17c (29%)

-Metcash ((MTS)) ex-div 8.50c (100%)

-Premier Investments ((PMV)) AGM

-Westpac Bank ((WBC)) AGM

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

Corporate news in Australia:

-HMC Capital’s ((HMC)) DigiCo Infrastructure REIT ((DGT)) lists today

-ACCC has accused Ventia Services ((VNT)) and Downer EDI ((DOW)) of price fixing arrangements when tendering for department of defence contracts

-Bloomberg reports BNPL service provider Klarna stopped all hiring a year ago to replace workers with AI 

-According to The Australian newspaper, Blackstone Group considered a potential $8bn acquisition of Dexus ((DXS)) but has reportedly paused its interest

-WiseTech Global ((WTC)) has acquired BSM Global

-Oaktree Global Management has sold its entire stake in Perenti ((PRN))

-Bain Capital is reportedly interested in a potential acquisition of Insignia Financial ((IFL))

-oOh!media ((OML)) is restructuring and cutting costs

The Australian share market over the past thirty days

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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