While global markets had a pause to gather their thoughts and take some profits off the table at the end of the week, ASX futures trading points to a marginal rise on the Australian market's opening.
Friday's 0.5 per cent fall in the MSCI global index wiped out the week's gains, although breaking it down the big winner was Japan up 3.4 per cent — helped by unexpectedly strong GDP numbers — the US was up 0.8 per cent, while Australia and Europe down 0.2 per cent and 0.3 per cent respectively were among the laggards.
The three key US indices all finished down 0.2 per cent on Friday, as some of the winners of the "Trump Rally" such as healthcare stocks were sold off a bit.
Markets on Friday's close:
- ASX SPI 200 futures +0.1pc at 5,369
- AUD: 73.45 US cents, 69.35 euro cents, 59.48 British pence, 81.30 Japanese yen, $NZ1.05
- US: Dow Jones -0.2 at 18,868 S&P500 -0.2pc at 2,182 NASDAQ -0.2pc at 4,808
- Europe: FTSE -0.3pc at 6,776 DAX -0.2pc at 10,665 Eurostoxx50 -0.7pc at 3,021
- Commodities: Brent oil +0.8pc at $US46.86/barrel, Gold flat at $US1,208/ounce, Iron ore -0.2pc at $US73.30/tonne
US dollar continues to rise as bonds sink
The big trades of the Trump Rally remain in place, despite the cautious end to the week.
The greenback is getting stronger and bond prices continue to fall as the betting higher interest rates shorten.
The rising US dollar also acted as counterbalance to US stocks, although it is not necessarily always the case according the AMP Capital strategist Shane Oliver.
"The last two big cyclical surges in the US dollar in 1981-85 and 1997-2001 were actually good for US shares with the S&P 500 index up 50 per cent and 80 per cent respectively," Dr Oliver said.
European and Japanese equities are also likely beneficiaries of a stronger US dollar.
The Reserve Bank will no doubt be pleased that the Australian dollar has weakened on the cross rate as well.
It fell below $US0.74 by the weekend, but then again the commodities rally and improving terms of trade is a countervailing force pushing the little Aussie battler back up.
While Mr Trump may rail against China as being a "currency manipulator", his victory has been driving the renminbi (RMB) lower in recent days.
The RMB fell another 1.2 per cent against the greenback last week, but is flat against a trade-weighted basket of global currencies.
"In fact the fall in the RMB against the $US is mild compared to that of other currencies," Dr Oliver argued.
"Over the last week the euro fell 2.4 per cent, the yen fell 3.9 per cent and the Aussie fell 2.5 per cent.
"So it's not a case of China artificially devaluing their currency ahead of a feared protectionist Trump presidency."
Oil up, iron ore down
The dynamic of commodity market appears to have flipped — at least for time being — with iron ore, coal and copper, going into reverse while oil enjoyed it best week in more than a month.
Iron ore spot prices were down 8 per cent and futures tumbled 16 per cent over the week, as concerns mounted about market fundamentals and regulators moved to chase speculators out of the market.
Brent oil rose 5 per cent over the week on speculation the proposed OPEC agreement to cut production may be delivered.
As is always the case in the opaque world of big oil, "industry insiders" received a fair run on wire services suggesting OPEC members are prepared to give the now sanction-free Iran some flexibility — or at least a couple of extra hundred-thousand barrels a day — on top of the original offer.
The OPEC meeting next week should deliver a result.
A "no deal" outcome is likely to see prices tumble back below $US40 a barrel.
Construction work still going backwards
Locally, it is a quiet week for data with the quarterly "construction work done" (Wednesday) the main interest.
The last reading was weak; construction work was down 3.7 per cent the June quarter and down more than 10 per cent for the year.
That is in keeping with the recent trend where activity has fallen in all but two quarters for the past four years as construction in the big new mining and gas projects wrap up.
As NAB's Davis de Garis points out, private engineering construction has declined by 36 per cent over the past year and by 54 per cent from peak levels in the September quarter of 2012.
"Activity in that sector is back to levels at the start of the decade," Mr de Garis said.
NAB forecast is in line with the market consensus for another 1.6 per cent fall in activity, the boost from residential investment and public infrastructure spending more than offset by a further winding down of resource sector spending.
Construction work is another key "partial" in the quarterly GDP puzzle and while still a drag on growth, its effect is becoming less pronounced.
Skilled vacancies (Wednesday) will also be scrutinised closely given the slightly confusing picture developing in the jobs market.
Skilled vacancies have been slowing, but not as much as suggested by other broader labour force data from the Australian Bureau of Statistics.
Fed minutes to point December hike
Things overseas are pretty quiet as well, although the __news flow from more appointments in the Trump administration could be interesting.
Minutes from the Federal Open Markets Committee November meeting (Wednesday) are likely to point to a December rate hike, but to extent are now dated having been overtaken by the surprise election result.
There is also a batch of US housing data which should reinforce the idea the sector is pretty solid.
Manufacturing surveys in the US, Europe (both Wednesday) and Japan (Thursday) are expected to show factory activity is still expanding in developed economies.
Japan should churn out another month of deflation (Friday).
For those who like their global risks, the focus now switches to Europe with the Italian referendum and Austrian presidential re-run in coming weeks having the potential to bring out the worry beads again.
Australia
| Monday 21/11/16 | Newcrest investor day | Insight into the gold-miner's plans |
|---|---|---|
| Tuesday 22/11/16 | RBA speech CYBG FY results | Asst Governor Christopher Kent out and about NAB's UK spin-off releases maiden results |
| Wednesday 23/11/16 | Construction work Skilled Vacancies | Q3: Plugged into GDP calculations, should bounce back after previous quarter's fall Oct: Forecast to slip |
| Thursday 24/11/16 | Business investment Woolworths AGM | Q3: Has been very weak Hasn't been a happy year for Woolies' investors |
| Friday 25/11/16 |
Overseas
| Monday 21/11/16 | JP: Trade balance | Exports supported recent GDP surprise, but both imports and exports have been falling |
|---|---|---|
| Tuesday 22/11/16 | US: Existing home sales EU: Consumer confidence | Oct: Solid Nov: More pessimistic than optimistic |
| Wednesday 23/11/16 | US: FOMC minutes US: Consumer confidence US: New home sales US: House prices US: Durable goods US, EU: PMIs | Minutes of last meeting held before election First post-election reading Oct: Continue to be solid Sep: Up around 0.7pc over the month Oct: Indicator of business investment, should bounce back Nov: Manufacturing surveys, both expanding |
| Thursday 24/11/16 | US: Thanksgiving Day US: Corporate profits JP: PMI | National holiday Q3: Fell almost 2pc in previous quarter Nov: Factory activity expanding a bit |
| Friday 25/11/16 | JP: Inflation UK: GDP US: Durable goods | Oct: More deflation forecast Q2: GDP growth of 2.3pc YoY forecast Oct: Indicator of business investment, should bounce back |
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