The ASX Today

The ASX is indicating it will advance this morning after emboldened traders drove markets to fresh highs overseas.

The ASX is indicating it will advance this morning after emboldened traders drove markets to fresh highs overseas.

The ASX SPI 200 Futures index hit a new high itself in the session just passed before abating and closing 21 points higher from yesterday's ASX 200 close. 

The US Federal Reserve has lifted rates by 0.25 per cent as expected to the range of 1.25-1.5 per cent, and chair Janet Yellen said the central bank is expecting to hike rates three times in 2018. 

Stocks, and bonds alike, rallied overnight even in anticipation of the rate hike. They did come back from their session highs though, some rather sharply, upon the announcement early this morning local time. Yellen also raised forecasts for US GDP from 2.1 to 2.5 per cent in 2018. Market pricing indicates investors still don't believe the Fed's rate projections for next year.

IG Australia chief market strategist Chris Weston said it's a big day for the ASX and he is questioning if the index can close at the strongest levels since 2007, which could confirm bullish momentum has finally kicked in and indicate broad-sweeping gains across the sectors. This would follow Westpac's consumer sentiment index delivering a surprisingly strong result yesterday for the December quarter.

KEY POINTS

  • Fed hikes rates by 0.25 per cent as expected, reiterates 2018 forecasts
  • Gold rallies on announcement, US dollar drops for Australian dollar to gain
  • November jobs data published in Australia today, consensus indicates an increase of 19,000 jobs and unemployment rate to remain at 5.4 per cent — all eyes on underemployment data
  • Inflation expectations for December released locally
  • Italian election news puts pressure on Eurozone equities

The Dow hit a new record in overnight trade. Even as Yellen's comments fed through in the hours before markets closed, investors continued to drive equities higher, but the S&P 500 swooned in the final 15 minutes of the session to actually close lower. 

The Australian dollar climbed higher on the Fed lifting rates this morning. It's now buying US76.31c to have gained around US1c in a little over 24 hours. The Aussie is also up on most cross rates. Expect this to be a big tailwind/headwind for certain Australian companies today, depending where they derive earnings from. The following chart is from earlier this morning:

The inflation view outlined in Fed chair Janet Yellen's speech has put pressure on the US dollar and lifted gold futures. The price has rallied by about $US20 in the last 24 hours to $US1258 an ounce, with the upswing clearly illustrated below:

Oil is lower again today, WTI losing 0.6 per cent to $US56.80 and Brent crude losing 1.2 per cent to $US62.59. This is in spite of bigger-than-expected readings for inventory draws — yesterday's API inventory data showed a draw of 7.8 million barrels, eIA stocks data showed a fall of 5.1 million barrels.

Still on that commodities beat, copper has put on 1 per cent overnight, rising for a sixth consecutive day on improving global sentiment. Other base metal prices were mixed on the London Metal Exchange. Tin was down by 2 per cent. 

In London trade, Rio Tinto shares rose by 0.2 per cent and BHP shares rose by 0.1 per cent.

In European news this morning, the Italian election has nearly been confirmed for March 4. Italian Parliament will be dissolved between Christmas and the new year. Shares fell on the announcement as there is a high degree of uncertainty around the outcome. Italian banks, which have a large exposure to government debt, fell by 2.9 per cent. The German DAX fell by 0.4 per cent while the UK FTSE fell by 0.1 per cent.

Market Summary: 
IndexLastPoints ( /-)Change (%)
Dow24,585.4380.630.33
S&P 5002,662.85-1.26-0.05
Nasdaq6,875.8013.480.20
FTSE 1007,496.51-3.90-0.05
DAX13,125.64-57.89-0.44

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