Most industrial commodities took a hit overnight Copper, Aluminium and Nickle all fell around 5%. Copper though is still up strongly for the week and has just tested its all-time high. Iron Ore also took another hit trading almost 6% lower at $116.93 US a tonne. News that China will implement trading limits and higher fees on futures trading is the likely reason. China is aiming to stop commodities markets from jumping too high. China has been controlling the narrative around this space for most of this year acting every time commodities prices jump.
The Nasdaq dud the heavy lifting overnight with the S&P500 also closing in the green, but the Dow closed down 6points. Strong earnings results from US-listed companies continue to push markets higher. Expectations had been lowered for this US earnings season, on the back of high covid cases and supply chain issues, but so far just about every major stock has beat expectations.
Inflation is still a worry with many investors starting to price in that interest rates could go up in the US next year. US Bond yields continue to climb, and which means many expect rates to rise. The US 10 year is now back to 1.70 which is high for the year. It will be interesting to see if it clears this level or not, furthermore, it will be interesting to watch how the market reacts. Locally the RBA continues to signal that interest rates won’t go up until at least 2024.
At this stage, the typical seasonal pattern is playing out perfectly here. We would expect the bullish momentum to continue through the US reporting, then a pullback at some point in November / early December. This then sets things up for a rally into Christmas. This year the US will need to deal with headwinds in Nov and Dec from the debt ceiling issues and the FED starting to taper. The FED will meet next in the first week of November.
Daily virus numbers worldwide continue to decline and are now almost half of what they were in early August. Locally we have seen NSW reach their targeted vaccination rates, allowing them to end their lockdown. The lockdown in Victoria is also poised to end tonight with the state reaching 70% double dosed. Vic is expected to hit the 80% mark within the next week or so. The end of these lockdowns should be good for the ‘reopening stocks’, such as travel, retail, tourism, or hospitality stocks, and will also help the wider economy.
The XJO is expected to open flat despite another strong night in the U.S where the SP500 managed to make new all-time highs. Their futures sit flat and their move last night wasn’t as aggressive as to what we have seen at the beginning of the rally.
Yesterday our market was uneasy around the 7,400 level. We tried to push through at one stage, but ended up pulling back into the close. This was likely due to red U.S futures during our session, as we once again expected the U.S to stall and pull back – which of course didn’t eventuate. Yesterday was the third day in a row where red U.S futures during our session had spooked us from sharing in the gains and pushing through 7,400.
Furthermore, our Materials (XMJ) are struggling around here, which is being offset by marginal gains in the Financials (XFJ) – when the two offset each other our market tends to track little to nowhere. The key resistance on the XMJ is likely to hold in the short term, as key commodities in the last 24 hours have taken a beating. Iron Ore looks like it is heading back to its recent lows. Overnight, copper fell more than 3 per cent. Nickel, aluminium, and zinc fell by roughly 5 per cent.
US shares climbed again, adding to their monumental run. The SP500 closed at its highest ever closing level after finishing in the green for the seventh straight session. Strong earnings results once again helped US markets, but there was also positive economic data to help drive things higher. US jobless claims data came in better than expected, while there were also more home sales than expected. Conversely, there were worse than expected business conditions in the state of Philadelphia. Seven of the eleven sector groups of the SP500 closed higher overnight, with Discretionary the strongest sector. Energy was the weakest sector overnight, and most other sectors closed fairly flat.