Overnight the US market closed mixed with Energy being the stronger performer. Yesterday the local market only closed slightly higher which came mainly from the strength of the Iron Ore miners.
Yesterday Iron Ore miners rallied strongly the following 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. FMG closed almost 14% higher. Even at this level, FMG is not overvalued from a price to earnings point of view, but in the short term, it will be interesting to see if we see some profit-taking or not after yesterday’s big move.
Despite the UK delivering a vaccine as early as next week, the Australian government is sticking to the March 2021 deadline to roll a vaccine out. This could dampen momentum a little in travel stocks as the vaccine could not come any sooner for that industry to get back on track.
The big one will be US fiscal stimulus, all signs at this stage are that we will see something in the coming weeks. This will help propel markets higher.
The XJO is expected to open fairly flat following similar leads from both the U.S last night and their futures this morning. The past few days have expressed just how unsure markets are at the moment as they consolidate at the top of the range. We are not allowed to move without U.S permission, and so we are likely waiting for news to develop in two major areas: vaccine, and stimulus.
The market is turning its attention to the millions U.S citizens who will fall below the poverty line, who’s backs are against the wall whilst congress drags their feet. In market terms, consumerism is likely to suffer significantly during the Christmas shopping period if the foot is not taken off the throat of the unemployed and disenfranchised. Congress is dragging its feat in typical fashion as each side of the bench fails to reach and agreement. At some point, it is not unrealistic to expect the market to spit the dummy and send congress a message.
Vaccine developments will likely lead to further bull runs, and the outlook for 2021 looks promising. Locally we have much to be thankful for, so for now we just await the green light from the U.S.
US shares closed flat overnight, with modest movements seen across the major US indices. Still, progress seems to be coming on the next round of US fiscal stimulus, with Democratic House Leader Nancy Pelosi and Republican Senate Leader Mitch McConnell speaking over the phone and declaring a ‘shared commitment’ to completing a stimulus bill.
US economic data was largely positive overnight, with initial jobless coming in lower than expected, while the services PMI for November was also better than expected. Tonight we will see the full range of US jobs data, including the unemployment rate for November, which is expected to drop slightly from the October number. Oil & Gas stocks were the strongest performers overnight, while Utilities and basic materials were the weakest. Every other major sector was flat.