EDITOR: | November 23rd, 2014

Rivkin Report: US stocks higher, Europe strongly higher, gold higher despite Swiss polls favouring ‘no’

| November 23, 2014 | No Comments
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US stocks higher, Europe strongly higher, gold higher despite Swiss polls favouring ‘no’, ASX futures 52 points higher

Night futures traders for the ASX’s SPI 200 got pretty excited after our day market shut on Friday, and no doubt the Chinese interest rate cut and associated performance of BHP and RIO’s dual listed entities on the London market assisted there. As you can see from today’s first chart, which shows the equivalent London Stock Exchange listings (BLT in black & RIO in orange) on the Rivkin Trader platform, the two stocks reversed a week of softening by popping 7.3% and 5.55%, respectively. I’ve thrown in Glencore Xstrata (GLEN) as a comparison, which shows how the broader sector to this news – this chart shows percentage movements since the start of last Monday’s session in London.

So while the iron ore price closed a touch lower on Friday, metals traders will look well beyond this and focus on the accommodative policy announced by China, being a 25 basis point cut to the one-year deposit rate and a 40 basis point cut to the one-year lending rate, bringing it down to 5.60%. This took effect on Saturday so one can understand the market’s fairly immediate response.

In hindsight the market’s focus up until this point has been very much a one-sided affair, being the concern of weakening growth and demand in China; however, little thought had been given to the fact that the Chinese are still committed to growth and, while growth targets have been slowing to ensure the economy doesn’t boil over, the willingness of the People’s Bank of China to intervene when things get a stuck a little is reassuring. Base metals markets, apart from iron ore, did close higher on Friday and precious metals markets performed well, so those long the resource sector have every reason to be hopeful today, and should be reassured by the broader message that China will not sit silently and watch sectors of their economy (most recently property) begin to freeze up.

There are two key dates out this week for commodity markets: 27 November is the November OPEC meeting that may (or may not – this could be a complete non-event) shed a little light on the Organisation’s plans to limit production; and on 30 November the Swiss will vote on whether to increase their gold reserves. I’ve covered the Swiss referendum in previous updates, in a nutshell my view is that it won’t pass; however, my view is that the market already knows this and is holding spot gold (XAUUSD) at US$1,198.40 regardless. I would not think a no vote would take the market for gold by surprise, so once again given gold is trading comfortably above its previous support level of US$1,180 I believe that a long trade is favoured here, with strict stop-loss limits in place at US$1,180 in case there are enough bets in play aimed at benefiting from a ‘Yes’ vote.

In today’s second chart I have continued to plot the AUDUSD currency pair, which does need to break one way or another away from this US$0.8650 level and I suspect we could see strength in this pair as Europe wakes up this afternoon and considers the benefits of accommodative Chinese monetary policy. Today’s last chart is the USDJPY pair, again I think risk has been turned off a little on this pair pending the snap election to be held next month. I don’t see gains for this pair (translating to a weaker yen) being materially extended until Shinzo Abe has a fresh mandate to hammer away at quantitative easing, the election is due to be held on 14 December.

2014-11-23-Rivkin

Base metals higher overnight, apart from iron ore: aluminium +1.09%; copper +0.79%; nickel +1.64%; zinc +2.09%, iron ore -0.93%

Overnight

  • Dow up 91.06 points/0.51%
  • S&P 500 up 10.75 points/0.52%
  • NASDAQ up 11.10 points/0.24%
  • German DAX up 248.58 points/2.62%
  • WTI and Brent crude higher, US$76.51 and US$80.36
  • Gold and silver higher, US$1,198.40 & US$16.46

AU Market Preview

  • AUDUSD firm at US$0.8674
  • SPI 200 futures 58 points higher
  • No material data announcements today.

Tracy Weslosky

Editor:

Tracy Weslosky is the Founder and CEO of InvestorIntel Corp., a company that publishes InvestorIntel.com. A leading e-news source for investors, entrepreneurs and industry leaders ... <Read more about Tracy Weslosky>


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