New highs for the NASDAQ

The Federal Reserve’s Powell has strengthened the case for a rate hike, which brings the number of Federal Reserve (Fed) members calling for a rate hike in December to nine. Using 3rd quarter expansion numbers, this brings the GDP back to 3.2% annualised.

Federal Reserve
Source: Bloomberg

Along with global rising yields in the bond market, China continues to tighten capital outflows of renminbi, weakening the case for a reserve currency status. In the face of government tightening of capital out flows is also the rising ten-year yield, currently at 2.94%.

This has not flowed on to US yields, with the ten-year bond still yielding 2.29%, down 6%.

Traders are starting to bring bearish bets on energy, with WTI falling 3.6% ahead of any outcome from the OPEC meeting tonight. This continues to weigh on Australian and overseas oilers, with Woodside testing the current $30 support level. Current Santos price support is expected at $4.00.

With the Nasdaq trading to a new all-time high of 5403 points, US markets remain resilient in the face of Italy’s impending referendum and uncertainty in the oil markets.

For the Australian markets, we are looking for further consolidation below 5500 points.

Keep in mind that the index is driven by ten stocks that make up 50% of the weighting of the ASX 200 benchmark. Momentum is required from the financials and resources to have our market breakout over this key 5500 level. With iron ore falling 4.3% and coking coal $1310, down 7% and coming back from recent dizzy heights, there will be some caution in this space.

The gold (-0.4%) and copper (-2.3%) space also saw further weakness, and we should see this follow through into the Aussie gold and copper producers NCM, OZL and S32 today.

Overnight ADR’s for BHP and CBA suggest a lower open for both, with BHP $25.10 (last at $25.49) and CBA $77.55 (last at $77.66) overall will bring opening weakness.

The SPI futures have the market opening 13 points higher at 5470 points.

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