ASX to edge lower, Japan prepares for first interest rate rise since 2007

The XJO is expected to edge lower on open this morning following a flat night of trading in the U.S. Their futures are also flat.

Our expected pullback this morning is likely chalked up to a handful of factors. Firstly, like the U.S, we are holding the key resistance that represents our all-time highs (which comes in at roughly 6,720). Secondly, we have finally caught up to the U.S, which over the past few sessions has shown a reluctance to push through and make fresh all-time highs.

We are likely reluctant to make any further gains without seeing the U.S do so first. Finally, markets are simply due for some healthy profit taking. Even though we have seen flashes in the pan on the recent run up, the current uptrend is in no way sustainable. We should expect a pullback soon, and a bounce from all-time highs seems an appropriate. However, we will need to wait and see.

If we do see a pullback, then roughly 7,500 is the next key level of support. If selling is aggressive, we could blow past it with 7,450 and 7,400 being the following key levels.

US Markets

Equity markets closed mixed overnight, with the Dow Jones up +0.1%, and both S&P 500 and NASDAQ flat. U.S. initial jobless claims rose 12k to 218k in the week ended December 23.

European Markets

European equity markets closed mostly lower overnight, with the Stoxx Europe 600 down -0.1%, German DAX down -0.2% and U.K. FTSE 100 closing flat.

Asian Markets

Asian equity markets closed mostly higher overnight, with the Shanghai Composite up +1.4% and Hang Seng up +2.5%, as PBOC vowed to implement a prudent monetary policy in targeted and effective manner, reaffirmed its pledge to push consumer prices higher, pledged to guide reasonable growth of credit, increase structural support for tech, infrastructure and other sectors, and to push government investment to stimulate private investment.

KOSPI gained +1.6%, as data revealed an improvement in South Korea’s manufacturers’ sentiment for January and as South Korea’s financial regulator said it would expand refinancing support for corporate bonds and commercial paper issued by construction companies, as well as a program allowing small and medium-sized companies to raise funds via debt capital markets.

Nikkei 225 declined -0.4%, as BOJ Governor Kazuo Ueda continued to prepare the ground for Japan’s first interest rate increase since 2007, announcing it’s possible to make some decisions even if the bank doesn’t have the full results of spring wage negotiations from SME’s.

WTI oil is trading at US$71.91 a barrel, as rising inventories at the key US storage hub in Cushing, Oklahoma, partly offset a drop in national stockpiles to paint a mixed picture for demand.

Iron ore price is at US$130.61 per ton.

Spot gold is trading at US$2066 per oz.