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Market Opener – 07 Jan 2019

 
Local Markets Commentary
The Australian market opens the first full week’s trade for 2019 following disappointing domestic manufacturing data this morning, ahead of new UK parliamentary EU-related budget discussions tomorrow and separation plan debate Wednesday, plus influential China data late-week. 

Overnight Friday, international equities markets rallied and several key commodities recorded price gains.

A US trade representative and China trade officials are expected to meet in Beijing today and tomorrow following China’s confirmation of the planned resumption of US-China face-to-face trade talks Friday.

In addition on Friday, China’s central bank was reported be reducing bank sector reserve ratios by 1%, plus some charges, essentially unleashing $US210B (1.5 trillion yuan) for new lending.

China is scheduled to report major economic indicators for December later this week. Some economists anticipate foreign reserves anytime from this evening.

Also regionally, a services PMI is expected for Japan 11.30am AEDT today.

Locally today, (8.30am AEDT), AiG has published a contractionary 49.5 December manufacturing PMI, against 51.3 for November.

A weekly capital city residential property price report was expected ~9.30am.

In overnight Friday commodities trade, oil extended its current rallying.

US (February) gold futures turned lower. 

Iron ore (China port 62% Fe fines) again gained.

LME copper turned and rallied. Aluminium continued to do so, and nickel resumed a push higher. 

The $A was propelled beyond US71.17c after surpassing US70.45c early Friday evening, and this morning continued higher for a while.

Overseas Market Commentary
A robust bounce across major European and US equities markets overnight Friday came courtesy of a cocktail of encouraging indications, including positive research reports and recommendations for Intel and Netflix. 

Earlier Friday, China confirmed trade talks would commence again with the US this week, supporting higher openings on indices.

Major markets continued upwards to settle near session peaks, following pleasing comments from US Federal Reserve chair Jerome Powell and a better-than-anticipated US jobs report. The $US also retreated on each of these.

Mr Powell spoke publicly in a joint discussion with immediate former Fed chairs Yellen and Bernanke, confirming: the Fed would continue to be monitor data rather than pre-determine a policy; that policy could be ‘quickly and flexibly’ altered; that the Fed was prepared to adjust its balance sheet if needed; and that the Fed would be ‘patient’ regarding any further rate rises, in particular due to inflation levels. 

The Richmond Fed president backed the general stance, also offering the US economy was expected to slow this year.

In addition, European Central Bank (ECB) policy setter Benoit Coeure ventured regional rates would remain lower for longer, and that while financial crisis risks remained, current economic growth was viewed as ‘comfortable’.

The release of US December employment statistics delivered particularly pleasing wages growth and job creation.

312,000 jobs were created, following expectations of 176,000, and year-on-year wages growth was estimated at 3.2%. For the month, wages grew US11c per hour (0.4%).

Unemployment rose by 0.2% for the month to 3.9%.

Markit’s final 54.4 US December services PMI followed an initial 53.6 estimate and a final 54.7 in November.

In the euro zone, an initial year-on-year December CPI growth reading was estimated at 1.6% following 1.9% for November and against expectations of 1.8%.

November producer prices rose 4.0% year-on-year, following 4.9% during October.

A final December services PMI was reported at 51.2, from the initial 51.4 estimate, and represented a third consecutive monthly fall.

In the UK, November consumer credit was reported by the Bank of England to have increased by 7.1%, but at the slowest rate in ~four years, and against 10.9% a year earlier.

The December services PMI encouraged, coming in at 51.2, from 50.4 in November.

A December house price index fell 0.7% for the month, following a 0.4% November rise.

Year-on-year, prices rose 0.5%, against 1.9% for November.

Tonight in the US, ISM’s December services sector activity index is due, and will impact views on expected December quarter GDP.

A final November factory orders reading is also expected.

Elsewhere, UK plans to separate from the European Union could again unsettle following the UK PM’s confirmation over the weekend that parliament would resume debating issues Wednesday this week, and that she expected a new parliamentary vote ~January 15, that is, Tuesday next week.
 
Posted on 7/01/2019 7:00:00 AM

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