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8@eight: 6000 a bridge too far

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The local sharemarket due to open sharply lower after iron ore tumbled overnight. 

The last hour of trade in the US has seen some big moves in commodities and certain FX pairs coming into the close.

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Down day ahead

1. ASX: I would expect Australian traders will also take cautionary risk off positioning today, the SPI futures closed down 33 points. Keep in mind that iron ore was smashed 8.5% on the fixing last night, with iron ore and steel futures falling 1.4% and 0.8% respectively. Oil has finally found sellers, with US crude -1%. BHP is eyeing an open 4% lower and VALE (as a guide) in the US was hit 4.5%. Expect the leveraged pure plays to be taken to the woodshed. Gold stocks will benefit as the current bullish move continues, gold traded to $US1286 overnight as the safe haven risk off mood takes shape.

2. The Trump effect: The big question for traders and I am sure will be debated today and over the Easter period is whether President Trump is indirectly talking down the rally in the USD, but he is now having an effect on literally every other asset class. So, Trump has stolen the headlines, with China unsurprisingly no-longer deemed a currency manipulator (see the CNH rally), but also NATO are “no longer obsolete”. In an interview with the WSJ he has talked down the USD, effectively using the lack of bids to hit the offer and push USD/JPY markedly lower – Trump the momentum trader!

3. Currencies: We have seen this materialise over a number of session here, but the safe haven Japanese Yen rally come to abrupt halt as traders faded the move and locked in profits. This USD last trading at the key 100 level, after falling 0.6% in the last hour of trade has lifted the Australian dollar cross back above 75 handle.

4. Wall Street: The rally in US indices that began on November the 8th has been consolidating sideways since the week beginning 6th of March, while price consolidation is good and gives the market time to reflect if these levels are justified. Last night the S&P 500, often referred to as the global benchmark of the US economy, fell below the 50-day moving average, and setting off alarm bells for some trend followers. Good selling has been seen in industrials, financials and materials. Although the move lower in the benchmark indices has raised some alarm bells, recent moves have not traded below the significant support level of 2320 in the S&P 500.

5. Hanging tough: With the current geopolitical events taking place the global markets have remained resiliently strong, but this may be about to change. Interestingly , the US volatility index (or the ‘VIX’) is now starting to move higher towards the key 16 level as events in North Korea and Syria start to get the attention of China and Russia.

6. US results: Tonight we will see the start of the US reporting season with Wells Fargo, Citigroup and JP Morgan offering results. The market will be looking for strong earning per share growth north of 10% in this reporting season to justify the current rally.

7. What’s on today: Important numbers coming through today the first at 11.30am is the Australian employment rate, expected to remain at 5.9%, anything higher than this will ring alarm bells across the banking mortgage sector as serviceability is brought into question.  Other numbers today include the Chinese trade balance figures with a surplus of $US12.5 billion, with imports expected to increase 15.5 and exports 4.3%. While our markets are closed for Easter US trade balance will be released at 10.30pm tomorrow.

8. Market watch: 

SPI futures down 30 points or 0.5% to 5897

AUD +0.2% to 75.10 US cents (Overnight range: 74.73 – 75.18)

On Wall St, Dow -0.3%, S&P 500 -0.4%, Nasdaq -0.5%

In New York, BHP -4.7%, Rio -5.2%

In Europe, Stoxx 50 flat, FTSE -0.2%, CAC flat, DAX +0.1%

In London, Rio -4%, BHP -3.5%

Spot gold flat at $US1275.34 an ounce

Brent crude -1.1% to $US55.64 a barrel

Iron ore (Metal Bulletin) -8.5% to $US68.04 a tonne

Dalian iron ore -1.4% to 504 yuan a tonne

LME aluminium -1.2% to $US1898 a tonne

LME copper – 2.1% to $US5628 a tonne

10-year bond yield: US 2.29%, Germany 0.19%, Australia 2.50%

Description  This column was produced in commercial partnership
   between Fairfax Media and IG

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