We saw the BHP and Rio ADRs overseas rally strongly overnight following Iron Ore, Crude and other metals higher. News from Vale that it expects to produce between 300 million and 305 million tonnes of iron ore this year has people talking. The expectation is down from a prior target of producing between 310 million and 330 million tonnes.
We saw positive Vaccine news overnight, the UK has passed the Pfizer vaccine and will be in use within the next few days. With positive vaccine news and hopes of further US fiscal stimulus before Christmas, markets could easily continue to edge higher despite looking a little overheated in the short term.
Locally things remain positive, we saw positive GDP growth which suggests we are coming out of recession. We must remember that this is a different recession than others, some sectors in the economy will remain in recession for some time whilst others will thrive.
Borders continue to open whilst Virus numbers remain manageable which is all great for market sentiment. The China Australian tensions are a big deal though. We will continue to see some volatility in various areas of the market if things continue to worsen.
Australian Outlook
With the U.S breaking into all-time highs last night, our market is expected to share in the gains on open this morning. We are expected to open near 6625, putting us back above the 6600 level of support.
From here, we eye our post fall highs near 6750, a modest target if the U.S maintains its strength. On the other hand, it would be fair to expect volatility to remain as we often have a dip at the start of December to allow for a run into Christmas. Rather than make fresh local lows, instead we may just track sideward.
News remains positive, with market media keeping its magnifying glass on the virus and the vaccine. Cases continue to rally out of control in the U.S, but locally it has remained under control enough that borders are opening up and governments are providing incentives for travel. If things remain on track, the only major issue our market will face is a rising AUD/USD which puts pressure on our miners.
US Markets
US shares pushed slightly higher overnight, with fresh all-time high closes recorded for major US indices. Democratic leaders called for immediate talks on further stimulus and said that a $908 billion aid proposal should be the foundation for negotiations. The only major economic news for the US overnight showed a drawdown in US oil inventories.
Fed Chair Jerome Powell is also continuing to speak in front of congress, and all indications are that the current monetary policy settings will be maintained. Tonight we will see US jobs data, which could influence current stimulus negotiations. Oil & Gas were the strongest performers overnight, while every sector other than basic materials closed higher.
Tim Michaelides is the Head Trader at Emerald Financial Group.
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