ASX to rally this morning, despite mixed overnight lead

Global market pulling in different directions

Sentiment is still so-so in global markets. The S&P 500 is clinging onto the 3000 level, as US earnings season rolls-on. Despite a lukewarm Wall Street lead, the ASX 200 ought to open higher today. The trade-war was put back into the headlines, after US Vice President Mike Pence rebuked China for its treatment of Hong Kong. Concerns about the global growth outlook were allayed somewhat by slightly strong than expected European PMI data. ECB President Mario Draghi’s swansong saw the departing central banker state his hopes for a continuation of his legacy. And Brexit drama is heating up once again, introducing fresh uncertainty for market participants.

US stocks grind higher as earnings season continues

US equity indices are yet to find good reason to make a push higher. Earnings season is moving forward, and the results are generally better than expected. But downgrades to forward guidance is still putting a dampener on upside momentum. The Nasdaq charged overnight off the back of strong results from Microsoft yesterday morning. However, the S&P 500’s gains were dulled by “bellwether” company 3M’s results, which showed the detrimental consequences of the US China trade-war. The sheen has come off US tech’s big move overnight this morning too, after Amazon missed Q3 earnings estimates, and underwhelmed in its forward guidance for the next quarter.

ASX200 to open higher despite soft Wall Street lead

The ASX 200 ought to open about 39 points higher this morning. The jump at the open will drive the ASX200 through the 6700 mark that the index wrestled with yesterday. Thursday’s trade was largely about the energy and consumer discretionary stocks. The former jumped courtesy of oil’s rally this week. But the crucial move was in the latter. Retail Sales sensitive stocks leapt higher yesterday, after JB Hi Fi posted much better than expected results. The company’s success allayed fears the fears generated a fortnight earlier by Nick Scali’ earnings report, that the Australian consumer could be in a weaker-spot than once thought.

US VP Mike Pence puts US-China relations back in headlines

Having there been a degree of silence on the subject this week, US Vice-President Mike Pence put the trade-war back on the table as a market moving concern overnight. In a speech delivered in Washington, the Vice President criticized China for its human rights record, and failing – in his view – to uphold the tenets of the treaty protecting Hong Kong’s independence. The commentary only doused the market in a bit of cold-water during Wall Street’s trade. But it is a stark reminder in the bigger picture of the new dimensions the trade-war is developing. There is a moral and philosophical bent emerging, potentially complicating future trade-negotiations.

European PMIs has bulls hoping for manufacturing turnaround

The tangible effects of the trade-war were put into focus in European trade. The continent’s “flash” PMI readings were delivered to the market, and probably, overall, exceeded expectations. It was hardly a high bar to clear. However, judging by the outperformance of European stock markets last night, the data was enough to soothe investors nerves. The European wide manufacturing PMI number did undershoot forecasts, but the German number managed to print in line with expectations, and the French numbers were much stronger than expected. Though little to hang one’s hat on, the data raises hopes that trend-lower in global manufacturing activity is bottoming.

Mr. Whatever-it-takes says “never give up”

Mr. “Whatever-it-takes”, ECB President Mario Draghi, delivered his last meeting as the central bank’s head last night. No change to policy was expected from this meeting – and no change to policy was forthcoming. The interest in this meeting was instead in gauging how the transition from Uber-dove Mario Draghi, to his successor Christine Lagarde, might take shape. Draghi gave a simple message: “never give up”. The sentiment affirmed slightly the view that the ECB will look to maintain ultra-easy policy to tackle the Eurozone’s many economic challenges. The EUR/USD traded slightly lower off-the-back-of the ECB meeting, although it does remain relatively elevated in the 1.11-handle.

Brexit news hobbles pound, boosts USD

Brexit is back in the headlines, after a day’s reprieve. UK Prime Minister Boris Johnson’s request for a December 12 election was rejected by UK Labour Opposition leader, Jeremy Corbyn, who suggested he’d grant no such thing until an extension of the Brexit-deadline was officially granted. The EU will decide in the coming days whether to allow such an extension, which would probably see a new deadline put into place for the end of January 2020. The GBP dropped because of the overnight news, to be fetching around 1.2850 now – with the subsequently stronger USD, incidentally, seeing a sell-off in the AUD/USD into the low 0.6800 mark.