Where Are Investors Putting Their Money -Now Vs. Then?

A way to determine this is to simply plot the indices and then see how they stack up against each other. Price data should also be viewed and analyzed in a multi-timeframe environment: short-term, medium-term, and long-term.

As a trader or investor, we know it’s important to determine if a market is in a bull, bear, accumulation, or distribution phase. Additionally, we want to know how the market we’re trading is performing compared to its peers.

The following charts provide snapshots of how the SPY ETF (US S&P 500) is doing compared to the other US and global stock indices.

The year-to-date chart is showing us a maximum volatility spread of 15.73%. This is simply the difference between the highest stock index, Australia 200 +1.18% vs the lowest stock index US Nasdaq 100 -14.55%. Australia’s market has recently done well due to its strong energy and commodity interests which in turn has contributed to the strengthening Australian dollar.

SPY Year-to-date Daily: Max Volatility 15.73%

max volatility

TheTechnicalTraders – TradingView

The volatility spread at first doesn’t seem that significant but over time it can be substantial. This is one of the reasons why our team continually tracks global money flow according to each country’s stock index but additionally other types of markets and asset classes. Our quantitative trading research is crucial in determining which markets to trade and how to efficiently employ trading capital.

This maximum volatility spread during 2021-2022 is 44.42%. The highest stock index, India 50 +23.75% vs the lowest stock index Hong Kong 33 -20.67%. The Hong Kong and China stock markets have been plagued with numerous Covid issues in 2020, 2021, and now recently again in 2022.

SPY 2021-2022 Daily: Max Volatility 44.42%

max volatility

TheTechnicalTraders – TradingView

Now we can take a longer-term view of the past 2+ years covering Covid before and after. We notice that the Nasdaq 100 is the overall leader despite its recent negative performance in 2022.

This maximum volatility for 2020-2022 is 89.70%. The highest stock index, US Nasdaq 100 +69.70% vs the lowest stock index Hong Kong 33 -20.00%.

SPY 2020-2022 Daily: Max Volatility 89.70%

max volatility

TheTechnicalTraders.com – TradingView

Knowledge, Wisdom, and Application Are Needed

It is important to understand that we are not saying the market has topped and is headed lower. This article is to shed light on some interesting analyses of which you should be aware. As technical traders, we follow price only, and when a new trend has been confirmed, we will change our positions accordingly.

We provide our ETF trades to our subscribers, and in the last six trades we entered in March, all have now been closed at a profit! Our models continually track price action in a multitude of markets, asset classes, and global money flow. As our models generate new information about trends or a change in trends, we will communicate these signals expeditiously to our subscribers and to those on our trading newsletter email list.

Successful trading is not limited to when to buy or sell stocks or commodities. Money and risk management play a critical role in becoming a consistently profitable trader. Correct position sizing utilizing stop-loss orders helps preserve your investment capital and allows traders to manage their portfolios according to their desired risk parameters. Additionally, scaling out of positions by taking profits and moving stop-loss orders to breakeven can complement ones’ success.

What Strategies Can Help You Navigate the Current Market Trends?

Learn how we use specific tools to help us understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, we expect very large price swings in the US stock market and other asset classes across the globe. We believe the markets have begun to transition away from the continued central bank support rally phase and have started a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern begin to drive traders/investors into Metals and other safe-havens.

Historically, bonds have served as one of these safe-havens, but that is not proving to be the case this time around. So if bonds are off the table, what bond alternatives are there and how can they be deployed in a bond replacement strategy?

We invite you to join our group of active traders and investors to learn and profit from our three ETF Technical Trading Strategies. We can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com

Chris Vermeulen
Chief Market Strategist
Founder of TheTechnicalTraders.com

Markets Cautious Ahead Of Russia-Ukraine Tensions And Fed Meeting

Global equity markets were flung on a chaotic rollercoaster ride as investors grappled with Fed hike fears and mounting geopolitical tensions over Ukraine. In the currency space, king dollar edged higher despite the slight retreat in Treasury yields while gold glittered amid the risk aversion.

European markets are catching up on the strong US close this morning, but the caution in Asia has cast a cloud over sentiment as investors would prefer to shrug off the intense volatility that rattled global markets on Monday.

Although Wall Street swung back toward positive territory yesterday as investors exploited the selloff to snatch discounted shares, US equity bulls are certainly not out of the woods. Should inflation concerns, Fed hike fears, and geopolitical tensions fuel risk aversion in the days ahead, this could spell trouble for risk assets across the globe.

Overnight, Australia’s inflation jumped to 3.5% in the fourth quarter of 2021 amid rising petrol and housing costs.  The Australian dollar pushed higher during early trading as expectations rose over the RBA adopting a more hawkish tone at its next monetary policy meeting on February 1. Traders are currently pricing in a 58% chance of a rate hike by May 2022, with June fully discounted.

Spotlight swings on Fed meeting

Although monetary policy is widely expected to remain unchanged, the FOMC meeting could provide some key insight into how aggressive the Fed intends to tighten policy throughout 2022. Markets expect the central bank to signal on Wednesday that it plans to hike interest rates in March, with a total of four 25 basis point interest rates increases expected by the end of this year. While the Fed may stick to the script, any hesitancy on future rate increases or a more dovish tone could breathe life back into riskier assets. Alternatively, a hawkish Fed may deal another blow to stock markets, injecting equities bears with fresh confidence.

Commodity spotlight – Gold

Gold kicked off the week on a firm note as geopolitical tensions accelerated the flight to safety.

The slight retreat in Treasury yields also helped zero-yielding gold, as prices ventured towards the $1845 resistance level. There is no doubt that this will be a big week for gold with its near-term outlook likely to be influenced by the Fed meeting.

A hawkish Fed that signals multiple rate hikes could dampen the appetite for gold, resulting in prices sinking back towards $1831 and $1810. If the Fed surprises markets by deviating from the script and shows hesitancy in future rate hikes, this may push the precious metal higher towards $1870.

By Lukman Otunuga Senior Research Analyst

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Block Inc. to Become First Crypto-Related Listing on Australia’s ASX

The news hit the wires late last year of Australia’s Afterpay (APT) getting shareholder approval for Block Inc.’s planned $29bn buyout. Block Inc., previously known as Square Inc., is a mobile payment and merchant services platform.

Afterpay, Block, and the Acquisition

Afterpay is a buy no pay later firm, allowing customers to pay for both goods and services in installments. The company was founded in 2014 and has more than 16 million users.

Afterpay operates in Australia and New Zealand, North America, and the UK. The company floated on the Australian Securities Exchange (ASX) on 4th May 2016, with an offer price of $1.00. As of Friday, 14th January, Afterpay closed at A$69.03.

Twitter Inc. co-founder Jack Dorsey co-founded Block Inc. The former Twitter CEO had stepped down to focus on Block that was re-branded shortly after his stepping down as Twitter CEO.

Earlier this week, Reuters reported that the Bank of Spain had approved the $29bn buyout of Afterpay Ltd.

According to Reuters, this would be Block’s biggest deal to date and the largest sum paid for an Australian firm. Other ASX deals are still pending that will be larger, however, including a BHP-Woodside $31bn megadeal.

The merged company will list on the ASX on 20th January. The merger is expected to support Afterpay’s growth in the U.S market, where it competes with platforms such as PayPal and Apple.

According to news that hit the wires this morning, the ASX was putting a framework together for other blockchain-backed companies to float this year.

The exchange is also moving to blockchain, with the ASX CHESS (Clearing House Electronic Subregister System) replacement project implementing a blockchain-based clearing and settlement system. The estimated transition date from CHESS to blockchain is early 2023.

Other listed crypto-related firms include:

  • Coinbase Global Inc. (COIN), traded on the NASDAQ.
  • Bit Mining Ltd (BTCM), traded on the New York Stock Exchange.
  • HIVE Blockchain Technologies Ltd (HIVE), traded on the NASDAQ.
  • Bitfarms Ltd (BITF), traded on the NASDAQ.

Crypto-Linked Companies Go Mainstream

It’s been a busy start to the year for the crypto markets. While regulatory chatter has seen a marked increase, there’s also been plenty of activity within the crypto corporate space.

It’s not just crypto-related firms that are listing on exchanges that are getting air time. Just this morning, news hit the wires of crypto exchanges planning to offer stocks to compete with mainstream platforms such as Robinhood. U.S crypto trading platforms FTX and Bitstamp are reportedly planning to offer stock trading.

2021: A Year Defined by Soaring Inflation, Covid Variants & Market Resilience

After an extremely chaotic 2020, the world pinned hopes on stability and normality returning this year.

Indeed, 2021 kicked off on a positive note as the mass vaccinations against Covid-19 and confirmation of Joe Biden’s victory in the presidential election boosted investor confidence.

Renewed stimulus hopes from Biden’s $1.9 trillion economic rescue plan fuelled the risk-on mood, propelling US stocks to record highs during the first month of 2021. Console retailer GameStop also hijacked the headlines by surging over 1600% in January as a group of investors on Reddit fuelled a short squeeze in the company’s shares.

In February, a sense of caution enveloped global markets as investors mulled over the possibility of rising inflation becoming a major theme. Signs of inflation were already spotted across the globe amid supply-chain disruptions, while prices pressures were expected to return amid an economic boom powered by vaccines and pent-up consumer demand. Taking a look at commodities, gold tumbled to an 8-month low under $1720 thanks to rising yields, dollar strength, and growing global risk appetite.

Things started getting sticky in March as coronavirus variants appeared across the globe. In the United Kingdom, the B.1.1.7 strain was initially considered more lethal than earlier variants. Different variants of the novel coronavirus were also reported in Brazil and even India which saw a spike in cases despite vaccine rollouts. On the currency front, the dollar appreciated against almost every single G10 currency as investors speculated that the massive fiscal stimulus and aggressive vaccinations would help the US economy recover.

Q2 kicked off on a positive note despite global economic uncertainty caused by the ongoing pandemic. Equity bulls remained in the driving seat amid robust Q1 earnings, the Fed’s pledge to keep rates lower for longer, and China’s eye-popping 18.3% growth in the first quarter.

In other news, Coinbase made its debut on Nasdaq on April 14th which was seen as a watershed moment for the cryptocurrency industry.

Everyone was talking about copper in May as the commodity surged to a record high of $4.9. The rally was triggered by the reopening of major economies and the robust demand for minerals needed for the green energy agenda. Given how copper is used in everything from electric vehicles to home appliances like washing machines, the outlook was heavily bullish – especially amid the bigger global focus on green energy. The commodities boom, fuelled by rising global demand and supply shortages fuelled fears around inflation across the globe.

In the United Kingdom, the Delta variant of Covid-19 clouded economic recovery hopes in June. As the third wave of Covid-19 cast doubt on more lockdown easing before July, the British Pound tumbled against every single G10 currency, sinking as low as 1.3790 against the dollar.

It was not only the UK affected by the Delta variant, it swept across Europe and started gaining ground in the United States. Hotspots were also found in Asia and Africa.

A sense of unease gripped markets in July as Covid-19 cases across the globe surged. The International Monetary Fund (IMF) warned that unequal access to Covid vaccines risked derailing the global recovery. Global stocks displayed resilience despite the Delta variant fuelling the surge in coronavirus cases worldwide. Infact, the S&P500 concluded the month of July almost 2% higher despite the growing uncertainty. Down under, the Australian dollar collapsed like a house of cards due to a surge in virus infections and lockdown restrictions in Australia.

Hong Kong stocks stole the spotlight in August as the tech-heavy Hang-Seng Index briefly tumbled into bear market territory, dropping more than 20% from its mid-February peak. The descent was driven by China’s regulatory crackdown on sectors ranging from financial technology to education and gaming.

Risk-off was the name of the game during the final month of Q3 thanks to inflation fears, growth concerns, and mounting uncertainty over Covid-19. As inflation made itself at home in the United States, Federal Reserve policymakers were forced to accept that inflation proved to be larger and more long-lasting than expected. The terrible combination of growth doubts, turmoil surrounding China’s Evergrande and Fed taper fears saw the S&P500 fall 4.8% in September.

Oil prices exploded higher in October, with WTI rising beyond $80 for the first time since 2014 as surging natural gas prices spurred greater demand for crude ahead of winter.

Tight global supply and robust fuel demand in the United States and beyond energized oil bulls. WTI concluded the first month of Q4 roughly 10% higher while Brent was not too far behind gaining 6%. Interestingly, the IMF and World Bank both issued warnings over rising inflation.

After “talking about talking about” tapering for many months, the Federal Reserve finally made a move in November.

This marked a crucial turning point as it stepped away from its emergency policy. In a process known as tapering, the Fed was set to reduce $120 billion in monthly purchases of Treasuries and mortgage-backed securities. The mighty dollar appreciated across the board, boosted by increased expectations for a reduction in the Fed’s asset purchase and interest rate hike, possibly in late 2022. During this month, the World Health Organization (WHO) also declared a new coronavirus variant to be “of concern” and named it Omicron. It was first reported to the WHO from South Africa on 24 November.

Growing uncertainty over the Omicron variant weighed heavily on market sentiment in December. With the new variant in town spreading faster than the more prevalent Delta, this clouded the global growth outlook as countries across the globe announced tighter restrictions.

The end of 2021 saw major central banks turning hawkish in the face of rising inflation.

As one of the largest central banks in the world embarked on the path to policy normalization, other banks wasted no time to tighten. We saw the Reserve Bank of New Zealand (RBNZ) raise interest rates in November, the Fed doubling down on its stimulus taper in December, and the Bank of England (BoE) also surprising markets by hiking rates. Indeed, with US inflation skyrocketing 6.8% in the year through November and consumer prices soaring across the globe, this offers a taster of what to expect in 2022.

One key thing to keep in mind is that the S&P500 closed at record highs 69 times this year despite the global growth fears and covid related uncertainty.

US equity bulls were certainly in the driving seat throughout 2021 with the S&P500 up over 27% year-to-date, marking its third straight annual increase.

There is no doubt that 2021 was a historic year defined by runaway inflation, coronavirus variants, and resilient stock markets.

With persistent inflation likely to remain a major theme in 2022, it will be interesting to see whether this forces more central banks to tighten monetary policy. Let’s not forget about the current Omicron menace and risks of new variants potentially clouding the global economic outlook. Equity bulls dominated the scene this year but will we see the same in 2022? Or will the combination of rising inflation and tighter monetary policy end the bull run?

We saw some extreme events throughout 2021 with the show set to continue in 2022. It may be wise to fasten your seatbelts in preparation for another eventful and potentially volatile year for financial markets as 2021 slowly comes to an end.

By Lukman Otunuga Senior Research Analyst

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Caution Prevails as Investors Eye Omicron and Fed Meeting

The dollar held its ground despite US Treasury yields slipping in the previous session, while gold prices remained range bound, waiting for a fresh directional catalyst.

European equity futures are mixed this morning with investors clearly on edge ahead of a week dominated by central bank decisions and key economic reports. Any decisions made on monetary policies will set the tone for the rest of 2021 while heavily impacting risk markets.

With the Bank of England, Bank of Japan, European Central Bank, and Swiss National Bank all expected to keep monetary policy unchanged, all eyes will be on the FOMC meeting on Wednesday. Expectations remain elevated over the Fed announcing a faster pace of tapering in the face of rising inflation and using more hawkish language than has been seen in previous statements. If this does become reality, it could weigh on stock markets while boosting the dollar.

Investors eye Fed decision

The Federal Reserve’s December policy meeting remains the main event for markets this week. With US inflation surging to its highest level in nearly 40 years, equity markets still volatile and the Omicron variant fueling economic uncertainty, it will be interesting to see what policymakers at the Fed have to say.

Back in November, the FOMC made an official announcement on tapering. Fast-forward to today and the central bank is set to announce an acceleration of tapering from January 2022, with consensus expecting the pace to double in speed, in order to counter inflation. This has boosted expectations over the Fed hiking interest rates sooner than expected with traders currently pricing in a 73% probability of at least one rate hike by early May 2022 and fully pricing a 25-basis point hike by mid-June 2022.

Much attention will be directed towards the Fed’s new dot plot and updated economic forecasts. Back in September, policymakers were forecasting one rate hike in 2022, followed by three in 2023 and another three in 2024. The new dot plot is expected to show the majority of Fed members now expect two rate hikes in 2022.

Currency spotlight – AUDUSD

The Australian dollar stumbled into Tuesday’s session under pressure as virus cases surged in the country’s most populous state. Daily Covid-19 infections jumped to their highest level in more than two months, fueling concerns over the economic outlook. However, there was some good news as reports showed that business confidence remained well above its long-term average, despite dropping sharply to 12 in November from a downwardly revised 20 in October.

Taking a look at the technical picture, the AUDUSD remains under pressure on the daily charts. Sustained weakness below 0.7180 could encourage a decline towards 0.7080 and 0.7000, respectively.

Commodity spotlight – Gold

Gold could enter the holiday season with a bang due to key central bank meetings, economic data and developments revolving around the Omicron variant. Prices have been trapped within a range over the past few weeks with bulls and bears waiting for a fresh directional catalyst.

This may come in the form of the Federal Reserve meeting or other economic events that could impact risk sentiment. Should the Fed step up the gear on tapering, this is likely to punish gold prices as the dollar appreciates, yields rise and rate hike expectations jump. In the meantime, support can be found at $1765 and resistance around the psychological $1800 level.

By Lukman Otunuga Senior Research Analyst

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

ASX200 – U.S Inflation and Weekend Omicron News to Set the Tone

Economic Calendar 

Tuesday, 14th December

NAB Business Confidence (Nov)

Wednesday, 15th December

Westpac Consumer Sentiment (Dec)

Thursday, 16th December

Employment Change (Nov)

Full Employment Change (Nov)

Unemployment Rate (Nov)

The ASX200

It was a bearish end to the week, with the ASX200 falling for a 2nd consecutive day on Friday. Following a 0.28% decline on Thursday, the ASX200 fell by 0.43% to end the day at 7,354.

There were no major stats from the Australian session to provide direction through the day. The lack of stats left the markets to look ahead to U.S inflation figures due out late in the day.

With the U.S inflation figures considered key to next week’s FOMC projections, the Big-4 and commodity stocks had a mixed session.

The Stats

There were no major stats from Australia to provide direction.

The Market Movers

It was a mixed day for the banks. Westpac fell by 0.81%, with ANZ down by 0.51%. CBA (-0.27%) and NAB (-0.21%) also saw red. Macquarie Group bucked the trend, however, rising by 0.02%.

Commodity stocks also had a mixed session. Newcrest Mining slid by 1.74%, with Fortescue Metals Group Ltd and BHP Group seeing losses of 0.82% and 0.60% respectively. Rio Tinto avoided the red, however, rising by 0.03%

Other Asian Markets

Elsewhere, it was also a bearish session. The Nikkei225 and the Hang Seng Index fell by 1.07% and by 1.00% respectively, with the CSI300 ending the day down by 0.46%.

The Day Ahead

It’s another particularly quiet day ahead on the Aussie economic calendar. There are no material stats from Australia to provide direction through the session.

The lack of stats will leave the markets to respond to the U.S inflation figures from Friday and Omicron news updates.

Friday’s gains across the U.S markets should deliver early support, with the rate of acceleration of U.S core inflation having eased in November.

The Futures

In the futures markets, at the time of writing, the ASX200 was up by 13 points.

For a look at all of today’s economic events, check out our economic calendar.

ASX200: Weekly Wrap – 10/12/2021

Economic Calendar

Tuesday, 14th December

NAB Business Confidence (Nov)

Wednesday, 15th December

Westpac Consumer Sentiment (Dec)

Thursday, 16th December

Employment Change (Nov)

Full Employment Change (Nov)

Unemployment Rate (Nov)

The ASX200

It was a bullish week for the ASX200, which rose by 1.55% in the week ending 10th December to end the week at 7,354. In the previous week, the ASX200 had fallen by 0.52%.

With economic data from Australia limited to house price figures, the RBA and market sentiment towards the Omicron strain were key in the week.

While news updates suggested that vaccine efficacies may be materially lower, there was also early evidence that the new strain was a milder one. Also delivering support were early suggestions that a 3rd vaccine would be sufficient to increase protection against any severe illness.

The news in the week coincided with the RBA’s view that the new strain would not derail the economic recovery. On Tuesday, the RBA left policy unchanged, which was in line with expectations.

Throughout the week, however, market sentiment towards U.S inflation and FED monetary policy pegged the ASX200 back.

The Stats

Economic data was limited to house price figures. In the 3rd quarter, the House Price Index rose by 5.0% quarter-on-quarter. The index had risen by 6.7% in the previous quarter.

From Elsewhere

Trade and inflation figures for China were in focus.

China’s USD trade surplus narrowed from $84.54bn to $71.72bn in November. Exports rose by 22%, year-on-year, while imports were up 31.7%. Imports had been up by 20.6% in October, while exports had been up by 27.1%.

While exports were down, strong demand driving imports was a positive for the markets.

In November, China’s annual rate of inflation accelerated from 1.5% to 2.3%. Economists had forecast an annual rate of inflation of 2.5%. Month-on-month, consumer prices increased by 0.4% versus a forecasted 0.3% rise. In October, consumer prices had risen by 0.7%.

Significantly, however, was softer wholesale inflation. In November, the annual wholesale rate of inflation eased from 13.5% to 12.9. Economists had forecast an annual wholesale rate of inflation of 12.4%.

The Market Movers

It was a bullish week for the banks. NAB led the way, rallying by 2.40%, with ANZ and Commonwealth Bank of Australia rising 1.63% and 1.34% respectively. Macquarie Group (+1.13%) and Westpac (+0.72%) ended the week with relatively modest gains, however.

Commodity stocks had a mixed session. Fortescue Metals Group Ltd rallied by 5.85% to lead the way, with Newcrest Mining (+1.76%) and Rio Tinto (+0.32%) also finding support. BHP Group ended the week down by 0.67%, however.

Other Asian Markets

Elsewhere, it was also a bullish week. The Hang Seng Index and the Nikkei225 rose by 0.96% and by 1.46% respectively, with the CSI300 rallying by 3.14%.

The Week Ahead

It’s a busier week ahead on the Asian economic calendar. From Australia, stats include business and consumer confidence figures in the 1st half of the week. On Thursday, employment figures will be key, however.

From China, industrial production and retail sales figures will also draw interest mid-week.

The FED’s monetary policy decision overnight on Wednesday, along with the economic projections will be the main event of the week, however. Following FED Chair Powell’s shift in stance on inflation, will there be a shift in outlook on interest rates?

Away from the economic calendar, expect Omicron news updates to continue to influence.

For now, the key downside risk remains news of Omicron resilience to existing vaccines…

ASX200 – A Quiet Economic Calendar Leaves COVID-19 in Focus as the Markets Look ahead to the FED

The ASX200

It was back into the red, with the ASX200 seeing a 4-day winning streak come to an end on Thursday. Partially reversing a 1.25% rally from Wednesday, the ASX200 fell by 0.28% to end the day at 7,385.

Uncertainty over the new Omicron strain and mixed reports, which had weighed on the European majors on Wednesday, pegged back the ASX200.

Optimism that the strain was less virulent had fueled Wednesday’s breakout. Reports from South Africa of the Pfizer vaccine being as much as 40 times less effective weighed, however. With more time needed to ascertain exactly how effective the existing vaccines are and whether a booster or 3rd dose would be sufficient, uncertainty will likely continue to hang over the global financial markets.

The Stats

There were no major stats from Australia to provide direction.

From China, inflation accelerated further in November. There was some comfort, with wholesale pressures easing, albeit modestly.

In November, China’s annual rate of inflation accelerated from 1.5% to 2.3%. Economists had forecast an annual rate of inflation of 2.5%. Month-on-month, consumer prices increased by 0.4% versus a forecasted 0.3% rise. In October, consumer prices had risen by 0.7%.

Significantly, however, was softer wholesale inflation. In November, the annual wholesale rate of inflation eased from 13.5% to 12.9. Economists had forecast an annual wholesale rate of inflation of 12.4%.

The Market Movers

It was a mixed day for the banks. CBA and NAB both ended the day up by 0.21% respectively. Macquarie Group fell by 0.53%, however, with ANZ (-0.18%) and Westpac (-0.24%) also seeing red.

Commodity stocks also had a mixed session. Fortescue Metals Group Ltd rallied by 1.50% to lead the way, with Newcrest Mining ending the day up by 0.26%. Rio Tinto and BHP Group saw red, however, falling by 0.94% and by 1.20% respectively.

Other Asian Markets

Elsewhere, it was a mixed session. The CSI300 and the Hang Seng Index rallied by 1.66% and by 1.08% respectively, while the Nikkei 225 joined the ASX200 in the red, with a 0.47% loss.

The Day Ahead

It’s another particularly quiet day ahead on the Aussie economic calendar. There are no material stats from Australia to provide direction through the session.

The lack of stats will leave the majors in the hands of the U.S markets and COVID-19 news updates. With the FOMC meeting just days away and U.S inflation figures due out in today’s U.S session, it could prove to be a testy day…

The Futures

In the futures markets, at the time of writing, the ASX200 was down by 10 points.

For a look at all of today’s economic events, check out our economic calendar.

ASX200 – Central Bank Chatter and China Inflation in Focus

The ASX200

It was a 4th consecutive day in the green for the ASX200 on Wednesday. Following a 0.95% gain on Tuesday, the ASX200 rose by 1.25% to end the day at 7,406.

Mining stocks, the big-4 banks, and tech stocks were on the move as the Asia markets responded to solid overnight gains on Wall Street.

Crude oil and commodity prices bounced back on news that there was evidence of vaccine resilience against the Omicron strain.

The Stats

There were no major stats from Australia to provide direction.

The Market Movers

It was a relatively bullish day for the banks. Macquarie Group led the way, rallying by 1.30%, with NAB ending the day up by 1.02%. ANZ (+0.73%), CBA (+0.33%), and Westpac (+0.57%) saw relatively modest gains, however.

Commodity stocks also had a bullish session. Fortescue Metals Group Ltd rallied by 3.27% to lead the way, with Rio Tinto and BHP Group rising by 2.18% and by 1.85% respectively. Newcrest Mining ended the day up by 0.94%.

Other Asian Markets

Elsewhere, it was a bullish session. The CSI300 and the Nikkei 225 rallied by 1.50 and by 1.42% respectively, with the Hang Seng Index gaining 0.06%.

The Day Ahead

It’s a particularly quiet day ahead on the Aussie economic calendar. There are no material stats from Australia to provide direction through the session.

On the monetary policy front, RBA Governor Lowe is scheduled to speak, however, and could move the dial.

From China, inflation figures for November will influence. Another spike in inflation could test support for riskier assets and the general consensus that inflation remains transitory.

Away from the economic calendar, while the markets move forward on Omicron optimism, next week’s FOMC meeting is nearing.

The Futures

In the futures markets, at the time of writing, the ASX200 was down by 27 points.

For a look at all of today’s economic events, check out our economic calendar.

ASX200 – A Quiet Economic Calendar Leaves the U.S Markets and Commodities to Give Direction

The ASX200

It was a bullish day for the ASX200 on Tuesday. Following a modest 0.05% gain on Monday, the ASX200 rose by 0.95% to end the day at 7,314.

Optimism from the RBA that the omicron strain would unlikely derail the economic recovery was key to the upside on the day. News of the PBoC easing property curbs cutting the reserve ratio requirement by 50 bps was also market positive.

Key going into the session, however, was a bullish overnight session on Wall Street. The U.S futures added further support, pointing northwards in the session.

The Stats

It was a quiet day on the economic data front, with stats limited to housing sector data.

In the 3rd quarter, house prices increased by 5.0% versus a forecasted 5.0% increase for the quarter. The House Price Index had risen by 6.7% in the previous quarter.

The numbers had a muted impact on the Aussie Dollar, however, with the markets looking ahead to the RBA monetary policy decision and rate statement.

From China

Trade data was also market positive.

In November, China’s US Dollar trade surplus narrowed from $84.54bn to $71.72bn. While the trade surplus narrowed, both imports and exports were better than expected.

  • In November, exports increased by 22% year-on-year versus a forecasted 19%. Exports had risen by 27.1% in the month prior.
  • Imports were up 31.7% versus a forecasted 19.8%. In October, imports had been up by 20.6%.

While the stats drew interest, the RBA monetary policy decision and rate statement were key.

In line with market expectations, the RBA left the cash rate unchanged at 0.1%. Additionally, the RBA decided to continue purchasing government securities at the rate of A$4bn a week until at least mid-Feb 2022.

Vis-à-vis the Omicron strain, the RBA viewed the strain as a new source of uncertainty, but did not expect it to derail the economic recovery. The statement revealed that the RBA expects the economy to return to its pre-Delta path in the first half of 2022.

The Market Movers

It was a relatively bullish day for the banks. ANZ led the way, rising by 1.55%, with NAB and Westpac seeing gains of 1.07% and 1.11% respectively. CBA and Macquarie Group ended the day up by 0.40% and by 0.17% respectively.

Commodity stocks also had a bullish session. Fortescue Metals Group Ltd rallied by 1.52% to lead the way, with Rio Tinto and BHP Group rising by 0.89% and by 0.91% respectively. Newcrest Mining ended the day up by 0.78%.

Other Asian Markets

Elsewhere, it was a bullish session. The CSI300 and the Nikkei 225 rose by 0.60 and by 1.89% respectively, with the Hang Seng Index rallying by 2.72%.

The Day Ahead

It’s a particularly quiet day ahead on the Aussie economic calendar. There are no material stats from Australia to provide direction through the session.

The lack of stats will leave commodity prices, COVID-19 news and the U.S futures to provide direction.  Overnight, it was a particularly bullish session on Wall Street, which should deliver early support.

The Futures

In the futures markets, at the time of writing, the ASX200 was up by 22 points.

For a look at all of today’s economic events, check out our economic calendar.

Deleveraging COVID Bubble – Possible Volatility Risks In Foreign Markets

I get asked all the time what my opinions are regarding the markets. As much as I could go into really deep details regarding technical analysis and other factors of my research, the simple answer is that we’ve been living through 2~4+ years of incredible market trends and unprecedented global central bank efforts to support and contain market risks. This is something we have not seen at these levels since the end of WWII and after the Great Depression.

Is there a Speculative Bubble Deleveraging Risk In The Global Markets?

The one thing that keeps popping up in my mind is the deleveraging of credit/debt and speculative risk assets over the next 2 to 3+ years. Let me explain what I mean by this statement.

Before the first COVID event (February 2020), the global markets were already within a moderate strengthening phase with relatively stable global trade, economic, and central bank participation. Everyone was still waiting for inflation to rise while employment and economic data continued to strengthen. When COVID hit, things changed very quickly.

  • Global lockdowns disrupted the labor and supply markets.
  • Consumers shifted gears while settling (or moving) into more rural locations attempting to wait out the new COVID threat.
  • Global central banks and governments attempted to navigate the catastrophic COVID event while settling population and finance issues.
  • An unprecedented amount of stimulus, global central bank financing, and speculative capital was unleashed over a very short 3 to 4-year span of time.
  • The success of the global economy prior to 2020 prompted a very deep and efficient speculative market trend in 2020 and beyond.
  • Now, that speculative bubble appears to be bursting – at least in certain areas of the markets.

Let’s explore a bit of data and charts.

This first Monthly chart highlights trends in various global market indexes. ARKK, the ARK Innovation Fund, HSI, the Hang Seng Index, DAX, the DAX Index, SPY, the S&P 500 ETF, and HXC, the Golden Dragon China Index. Each of these represents a unique component of global markets and sectors.

ARKK represents technology, innovation, and a more broad global investment style focused on stronger or more highly volatile price trends.

HSI represents a broad market China Index that includes various markets sectors – including Technology, Medical, Consumer, Real Estate, Finance, and others. These companies are listed in China and do a majority of their business in China.

DAX represents a broad market German Index.

SPY represents a broad market US Index

HXC represents the US-listed Chinese Companies doing a majority of their business in China.

The purpose of showing you this chart is to highlight the deleveraging that is already taking place in ARKK, HXC, and the HSI. The DAX and the SPY are still trending higher, while the ARKK, HSI, and HXC are trending strongly to the downside.

Chart, histogram

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It is my opinion that the global markets, particularly China/Asia, are already in the midst of a massive speculative deleveraging event – a post-bubble rally phase initial collapse process. Certain technicians sometimes call this an “unwinding” or “unraveling” event. Ultimately, the US has seen two of these types of events over the past 30 years – the 1999-2000 DOT COM bubble burst and the 2008-09 Housing Market collapse.

What I found interesting is the HXC price levels have already fallen to levels near the March 2020 COVID lows. Whereas the HSI price levels have also fallen to very near the March 2020 COVID lows, it has also fallen into negative price trending from 2014-15 price levels.

Could Speculative Deleveraging Stay Localized This Time?

I think global volatility and bigger price trends will be something we need to prepare for in 2022 and 2023 – possibly even longer. Yet, my opinion is the US, and other stronger global economies may be partially immune from this speculative deleveraging event.

Why?

Because not every US corporation or citizen has put themselves in a similar scenario as I believe many in China and Asia possibly have after nearly 30+ years of extreme growth trends.

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The US has experienced the 1999-2000 DOT COM bubble and the 2008-09 Housing Market crisis over the past 30 years. At the same time, China/Asia has grown from moderate obscurity in the 1980s-1990s into extensively powerful economies. Along the way, over a relatively short period of time, a generation or two of the populous has seen assets rise thousands of percent over the past 20 years. This leads to a highly speculative investment class – almost feeling as though anything they touch turns to gold.

But it doesn’t always work out that way – does it?

This HXC chart highlights the incredible rally after the February 2020 COVID event as well as the moderate growth phase from 2005 to 2016. Notice the big growth that took place in 2017. This was a period of very strong economic growth where Chinese companies started listing on US exchanges to tap into a strong US investor class.

After COVID hit in 2020, this speculative investing trend skyrockets over 180%. Then, it collapsed.

Chart, histogram

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Bitcoin May Follow This Deleveraging Trend If Panic Sets In

The recent rally and peak in Bitcoin have also caught my interest in seeing if this deleveraging event follows through in large Cryptos? Since the initial Bitcoin collapse in early 2021, Bitcoin has rallied strongly as the US markets recovered and inflation started to rise later in 2021. Now, a very strong pullback in Bitcoin has started at the same time large Chinese Real Estate developers and other corporations are beginning to experience severe credit/debt concerns.

Is there a correlation between Chinese/Asian consumer/economic strength and Bitcoin? Has the rise in Bitcoin prices over the past since 2015 been fueled by the rising speculative and investment trends in China/Asia?

We’ll know soon enough.

Chart, histogram

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If the global markets continue this process of speculative trading deleveraging, we’re going to see an increase in volatility and deeper price trends take place before the process completes. I suspect there is a huge amount of underlying credit/debt that is struggling in certain areas of the world right now. This type of speculation tends to drive a mentality of FOMO (fear of missing out) and YOLO (you only live once). I remember after the DOT COM bubble burst, I would talk to people that were so entrenched in the bubble, and they bought all the way through the collapse – believing it would bounce back.

This deleveraging event should stay somewhat immune from certain larger market economies. Yes, there will likely be more volatility and bigger price swings. But, eventually, the strength of consumers and economic trends will settle most of this process fairly quickly for the largest global economies.

2022 and 2023 are sure to be great years for traders. Sectors will rotate and trend. The world’s strongest economies will rotate and trend. The increased volatility will create risks, but it will also create incredible opportunities for profits.

Get ready; it looks like this deleveraging event is just getting started.

Want to learn more about deleveraging and volatility risks in the markets?

Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals.

If you need technically proven trading and investing strategies using ETFs to profit during market rallies and to avoid/profit from market declines, be sure to join me at TEP – Total ETF Portfolio.

For a look at all of today’s economic events, check out our economic calendar.

Have a great day!

Chris Vermeulen
Chief Market Strategist

 

ASX200: RBA in Focus after a Bullish Session on Wall Street

Economic Calendar

Tuesday, 7th December

House Price Index (QoQ) (Q3)

RBA Interest Rate Decision & Rate Statement

The ASX200

It was a mixed day for the ASX200 on Monday. Following a 0.22% gain on Friday, the ASX200 rose by 0.05% to end the day at 7,245.

Market concerns over the Omicron strain continued to weigh following Friday’s pullback on Wall Street. Supported by a surge in the U.S futures markets, however, the ASX200 reversed losses from the day to end the day in the green.

It was a mixed day for mining stocks, while the Big-4 delivered much-needed support. Tech stocks continued to struggle, however, with Afterpay Ltd down 4.32% on the day and Xero Ltd down 1.79%.

The Stats

It was a particularly quiet day on the economic data front, with no major stats through the Asian session to provide direction.

The Market Movers

It was a relatively bullish day for the banks. CBA led the way, rising by 0.65%, with NAB ending the day up by 0.29%. Macquarie Group (+0.17%), Westpac (+0.10%), and ANZ (+0.04%) all saw modest gains, however.

The commodity stocks had a mixed session. Newcrest Mining rallied by 1.54%, with Fortescue Metals Group Ltd rising by 0.29%. Rio Tinto and BHP Group fell by 1.78% and 1.59% respectively, however.

Other Asian Markets

Elsewhere, it was a bearish session. The CSI300 and the Nikkei 225 fell by 0.17% and by 0.36% respectively, with the Hang Seng Index ending the day down by 1.76%.

The Day Ahead

It’s a relatively quiet day ahead on the Aussie economic calendar. House price figures for the 3rd quarter are due out in the early part of the session. The numbers are unlikely to have an impact on the ASX200, however.

The RBA monetary policy decision and, more importantly, the rate statement will be key. Following a shift in policy guidance by the FED, the markets will be looking for change in forward guidance stemming from persistent inflationary pressure and the new Omicron strain.

Going into the open, the overnight Wall Street bounce back should deliver support.

The Futures

In the futures markets, at the time of writing, the ASX200 was up by 29 points.

For a look at all of today’s economic events, check out our economic calendar.

ASX200: A Quiet Economic Calendar Leaves COVID-19 and U.S Futures to Influence

Economic Calendar

Tuesday, 7th December

House Price Index (QoQ) (Q3)

RBA Interest Rate Decision & Rate Statement

The ASX200

It was a relatively bullish day for the ASX200 on Friday. Reversing a 0.15% decline from Thursday, the ASX200 rose by 0.22% to end the day at 7,241.

Market concerns over the Omicron strain, it’s virulence, and existing vaccine efficacy continued to test support for riskier assets.

Support for the Big-4 banks, however, off the back of overnight gains from Wall Street delivered support at the end of the week.

The Stats

It was a particularly quiet day on the economic data front, with no major stats from Australia to provide direction.

From elsewhere, service sector PMI data from China did disappoint, however.

In November, the Caixin Services PMI fell from 53.8 to 52.1. Economists had forecast a more modest decline to 52.6.

According to the November survey,

  • Total new business rose at the slowest rate for 3-months and only marginally overall, with foreign demand rising modestly.
  • Measures to curb the spread of COVID-19 had weighed on new order inflows.
  • Strong business confidence and efforts to expand capacity led to a further increase in employment. The rate of job creation was the quickest since May.
  • Average input prices increased for a 17th consecutive month, with the rate of inflation accelerating to a 6-month high.
  • Prices charged, however, rose at a softer pace in November.
  • Firms remained strongly confident, however, that output will increase over the next year.

The Market Movers

It was a bullish day for the banks. CBA and Macquarie Group ended the day up by 0.74% and by 0.57% respectively. ANZ and NAB led the way, however, rising by 1.27% and by 1.30% respectively, with Westpac gaining 1.17%.

The commodity stocks had a mixed session. Fortescue Metals Group Ltd and Newcrest Mining fell by 0.87% and by 1.04% respectively. Rio Tinto and BHP Group made gains of 1.40% and 1.31% respectively, however.

Other Asian Markets

Elsewhere, it was a mixed session. The CSI300 and the Nikkei 225 rose by 0.92% and by 1.00% respectively, while the the Hang Seng Index ended the day down by 0.09%.

The Day Ahead

It’s a particularly quiet day ahead on the Aussie economic calendar. There are no major stats to provide direction through the session.

The lack of stats will leave COVID-19 news updates and U.S futures to provide direction. Overnight losses from the U.S on Friday will likely test support going into the open.

ASX200: Weekly Wrap – 03/12/2021

Economic Calendar

Tuesday, 7th December

House Price Index (QoQ) (Q3)

RBA Interest Rate Decision & Rate Statement

The ASX200

It was another bearish week for the ASX200, which fell by 0.52% in the week ending 3rd December. In the week prior, the ASX200 had fallen by 1.58%.

Economic data failed to have an impact in the week, as the markets responded to FED Chair chatter and COVID-19 news updates.

Early in the week, FED Chair Powell gave testimony on Capitol Hill. The FED Chair spoke of the need to discuss accelerating the tapering of bond purchases. More significantly, however, was a shift in view on inflation. Powell stated that it was time to end referring to the latest spike in inflation as transitory.

The comments raised the prospects of a sooner than anticipated move on interest rates. Importantly, the comments also affirmed market fears of a more hawkish FED following Powell’s reappointment in the week prior.

The Stats

Company gross operating profits and private sector credit figures were in focus early in the week.

In the 3rd quarter, profits rose by 4.0% off the back of a 7.1% jump in the quarter prior. Private sector credit increased by just 0.5% in October, however, easing from a 0.6% rise in the month prior.

Mid-week, GDP numbers for the 3rd quarter delivered some comfort, with the economy contracting less than expected.

Quarter-on-quarter, the economy contracted by 1.9% versus a 2.7% contraction. The economy had expanded by 0.7% in the previous quarter.

Late in the week, trade data drew little interest in spite of a narrowing of the trade surplus from A$12.243bn to A$11.220bn.

From Elsewhere

Economic data from China failed to impress.

In November, the Caixin Manufacturing PMI fell from 50.6 to 49.9 versus a forecasted decline to 50.5.

According to the November survey,

  • Three of the 5 PMI components weighed in November, these being
    • New orders fell marginally after 2-months of expansion. High output prices and the pandemic were cited as reasons for the decline.
    • Employment levels fell for a 4th consecutive month, though the rate of job shedding remained marginal.
    • Suppliers’ delivery times also weighed.
  • By contrast, output and stocks of purchases had positive influences.
  • After rising rapidly in October, input costs rose only modestly in November, with the rate of inflation the slowest since Oct-2020.
  • As a result, the rate of output charge inflation also slowed considerably in the month.

At the end of the week, the Caixin Services PMI fell from 53.8 to 52.1, rounding off a poor week on the economic data front.

The Market Movers

It was a mixed week for the banks. Macquarie Group rose by 2.26% to lead the way, with Commonwealth Bank of Australia (+1.90%) and NAB (+1.12%) also finding support. Westpac (-1.80%) and ANZ (-0.15%) ended the week in the red, however.

Commodity stocks also had a mixed session. Fortescue Metals Group Ltd and Newcrest Mining fell by 0.52% and by 6.18% respectively. Rio Tinto and BHP Group ended the week up by 1.12 and by 5.78% respectively.

Other Asian Markets

Elsewhere, it was a mixed week. The Hang Seng Index and the Nikkei225 fell by 1.30% and by 2.51% respectively, while the CSI300 ended the week up by a modest 0.84%.

The Week Ahead

It’s a quiet week ahead on the Asian economic calendar. From Australia, stats are limited to house price figures that should have a muted impact on the markets. While stats are on the lighter side, the RBA monetary policy decision and rate statement on Tuesday will be key.

From China, inflation and trade data will draw plenty of attention, however.

Away from the economic calendar, expect COVID-19 news updates and any further government measures to contain the spread of the Omicron strain to test support for riskier assets.

For now, the key downside risk remains news of Omicron resilience to extisting vaccines…

ASX200: A Quiet Economic Calendar Leaves U.S Moves and China PMI Numbers in Focus

The ASX200

It was another bearish day for the ASX200 on Thursday. Following a 0.28% decline from Wednesday, the ASX200 slipped by 0.15% to end the day at 7,225.

While it was a mixed day for the Big-4 banks, commodity and, ultimately, tech stocks left the ASX200 in the red, reversing a late move into positive territory.

Economic data from Australia failed to impress, with concerns over COVID-19 and a shift in the FED’s policy outlook weighing once more.

The Stats

It was a relatively busy morning, with finalized retail sales and trade data in focus.

In October, retail sales rose by 4.9%, which was in line with prelim figures. Retail sales had risen by 1.3% in September.

Of greater significance were trade figures for October.

Australia’s trade surplus, narrowed from A$11.82bn to A$11.22bn in October.

According to the ABS,

  • Goods and services exports fell 3% to A$1,491m, with the decline stemming from falling iron ore prices.
  • Goods and services imports fell by 3% to A$887m, the decline attributed to a fall in the imports of capital goods.

The Market Movers

It was a mixed day for the banks. CBA rallied by 2.15%, with Macquarie Group ending the day up by 1.47%. ANZ and NAB also found support, rising by 0.19% and by 0.80% respectively. Westpac bucked the trend, however, falling by 0.78%.

The commodity stocks had a bearish day. Newcrest Mining led the way down, sliding by 2.42%, with Rio Tinto falling by 1.63%. Fortescue Metals Group Ltd and BHP Group saw relatively modest losses of 0.12% and 0.48% respectively.

Amongst the tech stocks, Xero Ltd (-5.11%) and Afterpay Ltd (-6.09%) saw particularly heavy losses.

Other Asian Markets

Elsewhere, it was a mixed session. The CSI300 and the Hang Seng Index rose by 0.25% and by 0.55% respectively, while the Nikkei ended the day down by 0.65%.

The Day Ahead

It’s a quieter day ahead on the Aussie economic calendar. From Australia, there are no material stats to provide direction through the early part of the day. The lack of stats will leave the ASX200 in the hands of the U.S markets from overnight and the U.S futures early on.

Later in the morning, China service sector PMI numbers from China will influence.

Away from the economic calendar, the markets will also need to continue monitoring COVID-19 news updates from across the globe.

The Futures

In the futures markets, at the time of writing, the ASX200 was up by 52 points.

For a look at all of today’s economic events, check out our economic calendar.

ASX200: Australian Trade in Focus as the Markets Look to Shake Off COVID-19 Woes

Economic Calendar

Thursday, 2nd December

Trade Balance (Oct)

The ASX200

It was a choppy day for the ASX200 on Wednesday. Reversing a 0.22% gain from Tuesday, the ASX200 fell by 0.28% to end the day at 7,236.

While better than expected, 3rd quarter GDP numbers from Australia highlighted the economic woes that could result from another COVID-19 breakout.

Disappointing economic data from China and hawkish chatter from FED Chair Powell overnight added downward pressure on the day.

The Stats

Manufacturing sector and 3rd quarter GDP numbers were in focus this morning.

In November, the AIG Manufacturing Index increased from 50.4 to 54.8.

According to the November Survey,

  • This was the first month of improvement following 3 months of flat results.
  • All sectors expanded except for chemicals, which was stable.
  • Food & beverages bounced back into growth, with the PMI up 19.9 points to 57.3.
  • All 7 activity indices expanded or were stable in November. Deliveries rose by 12.2 points to 53.4, with stocks up 7.0 points to 58.6. Strong demand supported an 8.5 point rise to 54.6 for exports.
  • The input price index slipped by 3.5 points to 78.3, while the selling index hit a series high 68.1, up by 4.2 points in the month to 68.1.

The Aussie Dollar moved from $0.71242 to $0.71299 upon release of the figures that preceded 3rd quarter GDP numbers.

In the 3rd quarter, the economy contracted by 1.9% quarter-on-quarter versus a forecasted 2.7% contraction. Year-on-year, the economy grew by 3.9% versus a forecasted 3.0%. The economy had expanded by 9.6% in the 2nd quarter year-on-year, and by 0.7% quarter-on-quarter.

According to the ABS,

  • Domestic demand drove the demand with prolonged lockdowns leading to a marked decline in household spending.
    • Private demand detracted 2.4 percentage points from GDP, with a 4.8% fall in household final consumption expenditure.
    • Spending on services slid by 5.8%, with falls in hotels, cafes, and restaurants, recreation and culture and transport services.
  • The decline was partly offset, however, by growth in net trade and public sector expenditure.
    • Public demand contributed 0.7 percentage points to GDP growth.
  • Household savings to income rose from 11.8% to 19.8%, the rise driven by increased household income coupled with reduced spending.

From China

In November, the Caixin Manufacturing PMI fell from 50.6 to 49.9 versus a forecasted decline to 50.5.

According to the November survey,

  • Three of the 5 PMI components weighed in November, these being
    • New orders fell marginally after 2-months of expansion. High output prices and the pandemic were cited as reasons for the decline.
    • Employment levels fell for a 4th consecutive month, though the rate of job shedding remained marginal.
    • Suppliers’ delivery times also weighed.
  • By contrast, output and stocks of purchases had positive influences.
  • After rising rapidly in October, input costs rose only modestly in November, with the rate of inflation the slowest since Oct-2020.
  • As a result, the rate of output charge inflation also slowed considerably in the month.

The Market Movers

It was a mixed day for the banks. Macquarie Group fell by 0.59%, with ANZ ending the day with a 0.15% loss. It was a relatively bullish day fo the rest, however. CBA rose by 0.68%, with, Westpac and NAB seeing gains of 0.34% and 0.33% respectively.

Commodity stocks were on the move, however. Rio Tinto led the way, rallying by 2.49%, with Fortescue Metals Group Ltd and BHP Group seeing gains of 1.29% and 1.45% respectively. Newcrest Mining bucked the trend however, falling by 0.34%.

Other Asian Markets

Elsewhere, it was a bullish session. The Nikkei and the CSI300 Seng Index rose by 0.41% and by 0.24% respectively, with the Hang Seng gaining by 0.78%.

The Day Ahead

It’s a quieter day ahead on the Aussie economic calendar. From Australia, key stats include trade data for October. With little else for the markets to consider, commodities and U.S futures will also provide direction.

Ahead of the open reaction to FED Chair Powell’s 2nd day of testimony would also need to be required.

Away from the economic calendar, the markets will need to continue monitoring COVID-19 news updates from across the globe.

For a look at all of today’s economic events, check out our economic calendar.

ASX200: Australian GDP and China Manufacturing Data in Focus

Economic Calendar

Tuesday, 30th November

Building Approvals (MoM) (Oct)

Current Account (Q3)

Private Sector Credit (MoM) (Oct)

Wednesday, 1st December

AIG Manufacturing Index (Nov)

GDP (YoY) (Q3)

GDP (QoQ) (Q3)

Thursday, 2nd December

Trade Balance (Oct)

The ASX200

It was a bullish day for the ASX200 on Tuesday. Partially reversing a 0.54% decline from Monday, the ASX200 rose by 0.22% to end the day at 7,256.

Better than expected economic data from China provided support, with support also coming from U.S equity market gains from overnight on Monday.

Market concerns over the new COVID-19 strain and government efforts globally to contain the spread remained a negative, however.

The upside on the day was not enough to prevent a 3rd consecutive month in the red. For the month of November, the ASX200 ended the month down by 0.93%, with last Friday’s 1.73% tumble in response to news of the new COVID-19 strain doing the damage.

The Stats

Building approvals and private sector credit were in focus this morning.

Building approvals tumbled by 12.9% in October after having fallen by 4.3% in September. Economists had forecast a 2% decline.

Private sector credit rose by a further 0.5% month-on-month in October, following a 0.6% increase in September.

According to the RBA,

  • Business credit rose by 0.5%, with housing credit up by 0.6%.
  • While housing credit had risen by 0.6% in the month prior, business credit had seen a larger 0.7% increase.
  • Personal credit was flat after a 0.7% decline in September.

From China

In November, the NBS Manufacturing PMI rose from 49.2 to 50.1, while the Non-Manufacturing PMI slipped from 52.4 to 52.3.

The Market Movers

It was a mixed day for the banks. Westpac slid by 1.91%, with CBA falling by 0.64%. Macquarie Group led the way, however, rising by 1.41%, with ANZ and NAB seeing gains of 0.30% and 0.37% respectively.

Commodity stocks also had a mixed session Fortescue Metals Group Ltd slid by 3.35% to lead the way down, with Rio Tinto and Newcrest Mining falling by 1.98% and by 2.32% respectively. BHP Group bucked the trend, however, rising by 2.07%.

Other Asian Markets

Elsewhere, it was a bearish session. The Nikkei and the Hang Seng Index slid by 1.63% and by 1.58% respectively, with the CSI300 ending the day down by 0.40%.

The Day Ahead

It’s another busy day ahead on the Aussie economic calendar. From Australia, key stats include manufacturing sector data and, more importantly, 3rd quarter GDP numbers. Expect the GDP numbers to be key.

From elsewhere, manufacturing sector data from China will also influence, with the all-important Caixin Manufacturing PMI for November in focus.

Away from the economic calendar, expect market reaction to FED Chair Powell testimony from overnight and COVID-19 news to influence.

Comments from Moderna CEO Bancel and hawkish chatter from the FED Chair will be negatives going into the session. Overnight FED Chair Powell talked of the need to discuss speeding up the reduction in bond purchases. Powell also suggested that it would be appropriate to stop describing inflation as transitory…

The Futures

In the futures markets, at the time of writing, the ASX200 was down by 51 points.

For a look at all of today’s economic events, check out our economic calendar.

ASX200: Private Sector Credit and China Private Sector PMIs in Focus

Economic Calendar

Tuesday, 30th November

Building Approvals (MoM) (Oct)

Current Account (Q3)

Private Sector Credit (MoM) (Oct)

Wednesday, 1st December

AIG Manufacturing Index (Nov)

GDP (YoY) (Q3)

GDP (QoQ) (Q3)

Thursday, 2nd December

Trade Balance (Oct)

The ASX200

It was another bearish day for the ASX200 on Monday.

Following last Friday’s 1.73% tumble, the ASX200 fell by 0.54% to end the day at 7,239.8.

Positive economic data from Australia failed to provide support as COVID-19 uncertainty continued to weigh on the Asian markets.

While mining found support following the flight to safety on Friday, the big-4 banks continued to struggle, along with oil stocks. Travel stocks also saw deep red as governments globally looked to curb the spread of the Omicron strain.

The Stats

In the 3rd quarter, company gross operating profits increased by 4.0% quarter-on-quarter versus a forecasted 3.0% increase. Profits had risen by 7.1% in the previous quarter.

According to the ABS,

  • Government subsidies supported company gross operating profits.
  • Wages and salaries fell by 0.8%, however.

The Market Movers

It was a bearish day for the banks. ANZ and NAB slid by 1.66% and by 1.63% respectively, with CBA falling by 1.09%. Macquarie Group and Westpac saw relatively modest losses of 0.65% and 0.76% respectively.

Commodity stocks had a mixed session, however Fortescue Metals Group Ltd rallied by 2.39% to lead the way, with Rio Tinto and BHP Group ending the day up by 0.99% and by 1.42% respectively. Newcrest Mining bucked the trend, however, falling by 0.37%.

Other Asian Markets

Elsewhere, it was also a bearish session. The Nikkei and the Hang Seng Index fell by 1.63% and by 0.95% respectively, with the CSI300 ending the day down by 0.18%.

The Day Ahead

It’s a busier day ahead on the Aussie economic calendar. From Australia, stats include building approvals, current account, and private sector credit figures. Expect the RBA’s private sector credit figures to draw the greatest interest.

From China, however, NBS private sector PMI figures for November will be the key stats of the day.

Away from the economic calendar, expect market reaction to FED Chair Powell overnight and COVID-19 news to influence.

The Futures

In the futures markets, at the time of writing, the ASX200 was up by 41 points.

For a look at all of today’s economic events, check out our economic calendar.

Omicron Hits the Markets

A new variant of Covid-19 has emerged and the markets have responded with a sell-off. Can this variant have a bigger impact on the economy than the previous ones, or is this just a temporary glitch? In this week’s market update you will find answers to the following questions:

  • Could Omicron sell-off extend beyond Friday?
  • What OIL traders should watch for?
  • How could the FOMC policy narrative affect Gold and dollar?

Don’s miss our latest market update: Watch now!

For a look at all of today’s economic events, check out our economic calendar.

ASX200: Weekly Wrap – 26/11/2021

Economic Calendar

Monday, 29th November

Company Gross Operating Profits (QoQ) (Q3)

Tuesday, 30th November

Building Approvals (MoM) (Oct)

Current Account (Q3)

Private Sector Credit (MoM) (Oct)

Wednesday, 1st December

AIG Manufacturing Index (Nov)

GDP (YoY) (Q3)

GDP (QoQ) (Q3)

Thursday, 2nd December

Trade Balance (Oct)

The ASX200

It was yet another bearish week for the ASX200, which fell by 1.58% in the week ending 26th November. In the week prior, the ASX200 had fallen by 0.62%.

While it was a mixed week on the economic data front, a Friday flight to safety across the global financial markets left the index in the red for the week.

Rising new COVID-19 cases across Europe and a new strain spreading from South Africa weighed heavily on riskier assets on Friday.

The ASX200 had been in positive territory for the week before the Friday sell-off. Adding to the market angst in the week was the reappointment of FED Chair Powell, which led to a more hawkish outlook on FED monetary policy.

The Stats

It was a relatively busy week on the economic data front. Key stats included private sector PMI and new CAPEX data ahead of retail sales figures at the end of the week.

Private Sector PMIs

Australia’s prelim private sector PMIs were in focus early in the Asian session.

In November, the manufacturing PMI rose from 58.2 to 58.5, with the services PMI jumping from 51.8 to 55.0. Both sectors hit 5-month highs in the month. As a result, Australia’s composite PMI increased from 52.1 to a 5-month high 55.0.

According to the November survey,

  • Easing of COVID-19 restrictions supported a pickup in private sector activity mid-way through the 4th
  • Output and demand both picked up from the previous month, with business confidence improving.
  • While employment conditions also improved, while price pressures persisted.
  • Input price inflation soared to a survey record high in November.

The Construction Sector

In the 3rd quarter, construction work down slipped by 0.3% quarter-on-quarter, following a 0.8% increase in the quarter prior. Economists had forecast a 3.1% slide.

Private New CAPEX

In the 3rd quarter, private new CAPEX fell by 2.2% versus a forecasted 2.0% decline. Private new CAPEX had increased by 4.4% in the previous quarter.

According to the ABS.

  • Buildings and structures slipped by 0.2%, while expenditures on equipment, plant, & machinery slid by 4.1%.
  • While negative, the estimate for 2021-22 was raised by 8.7% to A$138.6bn.

Prelim Retail Sales

In October, retail sales jumped by 4.9% versus a forecasted 2.5% rise, according to prelim figures. Retail sales had risen by 1.3% in September.

According to the ABS,

  • Food retailing fell by 0.5%, while household goods retailing increased by 4.5% in the month.
  • There were also increases in retailing for:
    • Clothing, footwear, & personal accessories (+27.7%).
    • Department stores (+22.4%).
    • Other retailing (+2.2%).
    • Cafes, restaurants, & takeaway food services (+12.3%).

From Elsewhere

Economic data from the U.S raised the prospects of a more hawkish FED stance on monetary policy.

Key stats included jobless claims, inflation, personal spending, core durable goods, and 3rd quarter GDP numbers.

In the week ending 19th November, initial jobless claims fell from 270k to 199k. Personal spending was also positive, with spending up 1.3% in October.

Core durable goods orders were market friendly, rising by 0.5% in October. In September, core durable goods orders had risen by 0.7%.

An upward revision to 3rd quarter GDP numbers failed to impress, however. The U.S economy expanded by 2.1% in the quarter, revised up from a previous estimate of 2.0%. Economists had forecast 2.2% growth, however.

Negative for riskier assets, however, was a pickup in inflation. In October, the Core PCE Price Index was up 4.1%, year-on-year. The index had been up by 3.6% in September.

The Market Movers

It was a bearish week for the banks. Macquarie Group slid by 6.12% to lead the way down, with Westpac (-4.79%) also deep in the red. While Commonwealth Bank of Australia (-3.07%) and NAB (-3.22%) also struggled, ANZ fell by a more modest 0.84% in the week.

Commodity stocks had a mixed session. Fortescue Metals Group Ltd jumped by 11.12% to lead the way, with Rio Tinto and BHP Group ending the week up by 4.66% and by 4.33% respectively. Newcrest Mining bucked the trend, however, falling by 2.29%.

Other Asian Markets

Elsewhere, it was a bearish week. The Hang Seng Index and the Nikkei 225 slid by 3.87% and by 3.34% respectively, while the CSI300 ended the week down by a modest 0.61%.

The Week Ahead

It’s a relatively busy week ahead on the Asian economic calendar. From Australia, company gross operating profits and private sector credit figures will be in focus early in the week.

In the second half of the week, however, 3rd quarter GDP and trade data for October will likely have greater influence.

From China, private sector PMIs for November will also provide direction, with Caixin Manufacturing PMI numbers on Wednesday likely to have the greatest impact.

While the stats will draw interest, central bank chatter and COVID-19 news updates will remain key, however. Riskier assets could take another hit should more governments shut down borders and talk of the need to reimpose lockdowns. Of greater significance, however, would be any news updates on the new strain’s resistance against existing vaccines.