Overnight we saw buying in all sectors, but the main indices SP500, Dow, and Nasdaq closed on resistance. It’s common to see a spike in the market coming into a FED announcement, we saw some momentum on US fiscal stimulus. The likelihood of US markets jumping into all-time highs coming into Christmas is high. As long as we see further US fiscal stimulus pass.
Locally we are well-positioned to continue higher. Iron Ore is holding strength, Dalian futures managed to close above a key level of 1,000 Yuan. Most other commodities also held strong. Sectors that are seen to strong as economies reopen are Financials, Materials, Energy and Industrials. We expect that these sectors will be the main driver of our market back out all-time high.
Issues with China continue to deepen as we see Australian Coal banned. Australian PM Scott Morrison declared that a Chinese ban on Australian coal imports would breach the WTO rules and the 2015 free trade pact between Beijing and Canberra. Morrison suggested that the perceived convergence of trade and politics may cause uncertainty for other nations. The issue with China is a dampener of sentiment but for now, isn’t enough to change the current trend.
With strong leads from the U.S last night our market is set to open roughly 50 points higher near 6680. U.S futures sit slightly in the green and if they remain steady to higher during our session, we will likely hold our gains if not rally further.
Like the U.S, we are trading in an uptrend and with the expected rally this morning we should bounce off the uptrend line. If we hold gains today, it looks like we are on our way back to test our post fall highs of 6730.
US shares pushed higher overnight as the second vaccine candidate (from Moderna) was found by the FDA to be highly effective at preventing COVID-19 inflections. There is also increasing optimism that the fourth US fiscal stimulus package will be passed before lawmakers break for holidays. The latest on this front is that Republican and Democrat senate leaders will keep politicians in Washington until a deal is passed. It’s looking like around $750 billion of provisions are now receiving majority bipartisan support, but there are still sticking points.
The vaccines can’t come soon enough for parts of the US, with New York close to entering another lockdown. We also have the Federal Reserve meeting tonight and they are expected to announce that they will continue with their current bond purchasing programs. US economic data was mostly better than expected overnight, with strong industrial production and export prices for the month of November. Utilities, Oil & Gas, Basic Materials, Financials, and Technology stocks all rose heavily overnight, while every other major sector closed in the green.