Market Morning Wrap:
Overnight Markets:
Another solid showing from all three U.S. indices overnight, with no significant economic data to derail the momentum from Friday. We witnessed a positive continuation:
- SPX: +0.62%
- Nas: +0.75%
- Dow: +0.62%
The oil and gas sectors were the top gainers in the session, followed by banks and retail.
Macro and Metals:
The 10-year yields rolled a bit during the session, helping equities stay bid. Gold and silver also benefited somewhat, maintaining recent gains. We are seeing gold and silver equities outperform the metals. Metals remained basically flat to slightly higher since the Australian session close, with gold up about $4 to $1919 and silver up about 5 cents, closing at $24.25. However, GDX and GDXJ were up by 2.1% and 2.8% respectively, and SIL was up by 2.3%. This again indicates the strength across equities.
Base Metals:
Base metals struggled to gain traction in the markets, mostly showing a lackluster performance overnight:
- Ni: -0.28%
- Cu: -0.01%
- Al: -0.08%
- Tin: -1.1%
With no significant directional news, base metals seem to be moving around aimlessly. There's no clear reason to move higher or lower, but it's essential to keep an eye on USD movements for potential direction.
Energy and Battery:
Both Natty Gas and Thermal (NEWC) contracts closed with minor gains, with NEWC up by 0.59% at $161.55 and Natty Gas up by 0.3%, closing at $2.665. Oil appeared to trade in a choppy manner, with WTI closing at $79.99. As mentioned earlier, the Oil and Gas sectors were the best performers among the U.S. sectors overnight, so keeping an eye on these sectors is advisable. Iron ore also maintained its gains, closing at 817 CNY. Something noteworthy this morning is the drop in Lithium Futures overnight (as mentioned yesterday to watch out for), with carbonate futures dropping to recent bounce lows and barely holding that level, closing at 197 CNY (previously mentioned the 195 CNY level yesterday).
Local Markets:
This morning, we're experiencing a positive continuation (for a change) as Aus futures are up 25 points or +0.35%. The market struggled to gain much momentum yesterday. We observed continued unwinding of bullish premium for Australian producer PLS (which was brought up weeks ago), and FMG also faced a significant selloff following earnings and the CEO's resignation. It's striking that this is reportedly the 10th leadership resignation in around 12 months for FMG. Such instability at the top can't be beneficial for the company. Regardless, we'll be keeping a close watch on it. The focus is mainly on whether FMG's discount to iron ore prices will widen enough to potentially consider fading the downside long, provided that the discount becomes significant. However, we'll wait and see, as it might be more prudent to get involved when the spread develops further.
Data (Sydney Time):
Once again, there is no notable local data today. From the U.S. at midnight, we have Consumer Confidence numbers for August. The main event this week could be the Non-Farm Payrolls and unemployment figures from the U.S., where market bulls may hope for an increase in unemployment and a miss on Non-Farm Payrolls, potentially reinforcing the sentiment of the Fed nearing the end of its rate hikes. We'll observe how that situation unfolds, especially on Friday.