ASX to rise, iron ore price rally bolsters BHP and Rio

That news, in addition to continuing strong steel demand in China and optimism that demand elsewhere will rebound in 2021, helped underpin another rise in the spot price of iron ore.

As for US markets, the Santa Claus rally may have come a month early.

“After the historic move in November we wouldn’t be surprised to see below average returns in December,” LPL Financial’s Ryan Detrick said in a note. “We do believe this is a new bull market and lasting economic cycle of growth, but overall sentiment is getting quite stretched and this increases the potential for some near-term weakness.”

Today’s agenda

Local: AiG performance of construction November, Housing finance October, Trade balance October; NZ building permits October

Overseas data: China Caixin services PMI November; Euro zone retail sales October; US ISM nonmanufacturng November

Market highlights

ASX futures up 20 points or 0.3 per cent to 6614 near 8am AEDT

  • AUD +0.6% to 74.12 US cents
  • On Wall St at 4pm: Dow +0.2% S&P 500 +0.2% Nasdaq -0.1%
  • In New York: BHP +4.1% Rio +4% Atlassian +1.8%
  • Telsa -2.7% Boeing +5.2% Salesforce.com -8.9%
  • In Europe: Stoxx 50 -0.1% FTSE +1.2% CAC flat DAX -0.5%
  • Spot gold +0.7% to $US1827.49/oz at 1.30pm New York time
  • Brent crude +2.2% to $US48.48 a barrel
  • US oil +2.3% to $US45.57 a barrel
  • Iron ore +3.1% to $US136.29 a tonne
  • 2-year yield: US 0.16% Australia 0.09%
  • 5-year yield: US 0.42% Australia 0.32%
  • 10-year yield: US 0.94% Australia 0.98% Germany -0.52%
  • US prices at 4pm in New York

From today’s Financial Review

GDP to bounce back further: The Australian economy is officially out of recession after growth bounced back 3.3 per cent in the September quarter from a collapse of more than 6 per cent in the June quarter.

Chanticleer: How ANZ’s insto bank got to No. 1: Earnings volatility caused by loan write-offs and the vagaries of financial market trading have made institutional banking divisions a risky place for ambitious executives.

United States

Biden will not rush to lift China tariffs, nor focus on trade deficit: President-elect Joe Biden said the key to talks with China is “leverage” and in his view “we don’t have it yet”; Trump’s election-fraud business is booming. Follow developments here.

Private payrolls increased by 307,000 jobs in November, the ADP National Employment Report showed, lower than economists’ forecast for a 410,000 rise in new jobs. Data for October, though, was revised up to show 404,000 jobs added instead of the initially reported 365,000.

Boeing’s 737 MAX took off on its first public appearance with media onboard since being grounded over fatal crashes, as one of its biggest customers, American Airlines, seeks to prove it is safe for passengers.

Wednesday’s flight from Dallas, Texas, to Tulsa, Oklahoma, comes weeks before the first commercial passenger flight on December 29, and is part of a concerted PR effort to restore the jet’s image following a 20-month ban.

Yardeni Research on net earnings revisions: “The S&P 500’s NERI improved in November for a sixth straight month and was positive for a fourth month following 13 straight negative readings. NERI rose to a 32-month high of 15.2 per cent from 15.1 per cent in October and is up from an 11-year low of -37.4 per cent in May. That compares to a tax-cut-induced record high of 22.1 per cent in March 2018. NERI was positive for 10 sectors for a third month in November, the most since September 2018. That compares to negative NERI readings for all 11 sectors from April to July.”

Europe

European shares erased session losses to close flat on Wednesday on an over 1 per cent surge in London blue-chips after UK became the first country to approve Pfizer and BioNtech’s COVID-19 vaccine.

London’s FTSE 100 outperformed most regional peers, after Britain said the vaccine will be rolled out from next week, and as the pound slumped on Brexit trade deal uncertainty.

The pan-European STOXX 600 index ended steady with London’s Rio Tinto, BHP Group HSBC among the biggest boosts.

BioNtech’s Frankfurt-listed shares jumped 4 per cent, compared with a 0.5 per cent fall for Germany’s benchmark DAX index , which lagged the most in the region.

Germany is planning to extend restrictions on restaurants and hotels until January 10, sources familiar with discussions between the federal government and 16 states said on Wednesday.

Among individual stocks, the London Stock Exchange jumped 9.6 per cent after sources said the company is set to win EU antitrust approval for its $US27 billion acquisition of data analytics company Refinitiv.

Investors kept an eye on moves by Britain and the European Union as Brexit trade talks were still stuck.

Asia

Hong Kong shares settled lower on Wednesday, as technology and healthcare stocks dropped tracking mainland markets with investors taking a pause after a rally fuelled by upbeat factory data.

At the close of trade, the Hang Seng index was down 35.10 points, or 0.1 per cent, at 26,532.58. The Hang Seng China Enterprises index fell 0.8 per cent to 10,573.79.

At the close, the Shanghai Composite index was down 0.07 per cent at 3449.38.

The index hit its highest since February 2018 earlier in the session, as investors cheered better-than-expected manufacturing data and hopes of continued economic recovery.

China’s blue-chip CSI300 index ended flat, while the start-up board ChiNext Composite index was 0.6 per cent lower. Shanghai’s tech-focused STAR50 index closed up 0.3 per cent.

A US federal appeals court in Washington said it will hold December 14 oral arguments on the government’s appeal of an order that blocked a ban on Apple and Alphabet’s Google offering TikTok for download in US app stores.

Currencies

The safe-haven US dollar sank to a fresh 2-1/2-year low in choppy trading, pressured once again by expectations of further fiscal stimulus for the United States.

Vassili Serebriakov, an FX strategist at UBS in New York said the momentum for a weaker dollar should continue. “Any bounces in the dollar are likely to find sellers.”

Oanda’s Craig Erlam on bitcoin: “Bitcoin hit another record high yesterday before paring back and its struggling to take another run so far today. This is a big psychological barrier, albeit one I fully expect it to overcome and probably very soon. Once it does, the hype around it could propel it much higher initially.

“Should it fail to break those levels then it could be setting up for quite a punchy double top and treat us to the kind of correction we’ve seen in the past. I am not currently of the view that this will happen at this point, I still feel we’re in early bitcoin hype mode.

“Don’t get me wrong, it’s a case of when rather than if but I don’t think the when is now. Bitcoin always has surprises up its sleeve though. It’s what makes it such an interesting instrument to follow, albeit a highly speculative, volatile one.”

Commodities

OPEC+ has made headway toward a deal on oil-output cuts, the first sign of progress after failed talks earlier this week.

After days of direct negotiations between the group’s heavyweights — Russia, Saudi Arabia and the United Arab Emirates — details of any potential compromise still weren’t immediately clear. It was too early to say whether the progress would translate into a final deal, delegates said, asking not to be named because the talks were private.

TD Securities on copper’s rally: “The combination of waning demand growth and less speculative buying flow suggests the rally in copper is relying on a growing supply risk premium to pick up the slack. This begs the question — how much longer can China stockpile without underlying demand growth, before it loses its appetite?

“While we remain optimistic in the longer term, this stage of the rally may be running on fumes.”

Australian sharemarket

Sharemarket rally to be sustained by economic bounce: Investors are hoping signs of economic recovery will boost earnings and sustain the sharemarket rally.

The Australian sharemarket has closed just slightly higher on Wednesday, rallying from a mid-session dip.

The S&P/ASX 200 Index closed 1.7 points, or 0.03 per cent, higher at 6590.2.

BHP Group led the gains, rising 2 per cent to $39.31, Rio Tinto added 2 per cent to $104.99 and ANZ advanced 0.7 per cent to $23.03.

Street Talk

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