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ASX to slip, iron ore poised to top $US100 a tonne

Timothy MooreBefore the Bell editor

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Australian shares are poised to open lower, reflecting somewhat listless overseas trading with investors continuing to refine their rate outlook bets. China’s surging COVID cases represent a new risk.

ASX futures were down 9 points or 0.12 per cent to 7263. US stocks were mixed in a short session with the Dow advancing, while both the S&P 500 and Nasdaq closed lower. Apple fell amid signs iPhone supplies are significantly short of demand.

The local currency slipped 0.2 per cent, holding near US67.50¢.

On bitstamp.net, bitcoin was up 0.3 per cent at $US16,544.

The spot price of iron ore is on the verge of retaking $US100 a tonne, which the Platts’ unit of S&P Global Commodity Insights attributes to 2023 planning. Platts put the price at $US99.65 a tonne on Friday.

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Seaborne iron ore prices advanced “on the back of increased buying ... as Chinese end-users begin restocking for the Chinese Spring Festival which commences early 2023”, Platts said.

The festival will run from January 21 through January 27 next year.

Separately, China’s central bank moved to bolster flagging growth with a second cut this year in the amount of cash lenders must hold in reserve. The move is expected to inject $100 billion into the economy.

The cut is aimed at “keeping liquidity reasonably ample” and “increasing the support for the real economy”, as well as helping banks support industries damaged by the COVID pandemic, the PBOC said in a statement, according to Bloomberg.

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Emboldened Andrews promises to lead progressive march with PM The Victorian leader has vowed to govern for a full four-year term after Saturday night’s decisive victory, as progressive Liberal John Pesutto seeks the party leadership.

ASX settlement monopoly faces pricing controls, stricter oversight The government is preparing to give the ACCC new powers to arbitrate pricing disputes, and the RBA and ASIC the ability to order ASX to fix governance oversights.

Today's agenda

Local: October retail sales at 11.30am AEDT

Overseas data: UK nationwide house prices November; US Dallas Fed manufacturing index November

Market highlights

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ASX futures down 9 points or 0.12 per cent to 7263

  • AUD -0.2% to 67.51 US cents
  • On Wall St: Dow +0.5% S&P -0.03% Nasdaq -0.5%
  • In New York: BHP -0.6% Rio -0.6% Atlassian -0.3%
  • Tesla -0.2% Apple -2% Amazon -0.8% Alphabet -1.2%
  • Stoxx 50 +0.01% FTSE +0.3% CAC +0.08% DAX +0.01%
  • Spot gold -0.02% to $US1754.93/oz in New York
  • Brent crude -2% to $US83.63 a barrel
  • Iron ore +3.3% to $US99.65 a tonne
  • 10-year yield: US 3.68% Australia 3.57% Germany 1.97%

United States

Scotiabank’s Derek Holt discounts at this point retail sales for Black Friday and Cyber Monday, saying it’s becoming ever more difficult to parse the data because promotions seem to arrive earlier each year.

Holt said a key issue is the extent to which companies have a surplus of inventories and the potential for deep discounting to be disinflationary at least in the near term.

Europe

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Credit Suisse Group fell to a fresh record low as investors weighed the impact of the massive outflows the bank reported this week and news that rivals in the key growth market of Asia are benefiting from the Swiss firm’s troubles.

Shares of the lender declined as much as 5 per cent in Zurich on Friday after Vontobel cut its price target and said the firm “urgently” needs to halt outflows in its core wealth management business. The stock has declined for nine days straight, the longest losing streak since 2014.

French insurance broker April Group said private equity firm KKR & Co has become its new majority shareholder, according to a statement posted on its website.

The statement, which confirmed a Bloomberg News report, didn’t disclose deal terms. KKR is valuing the asset being sold by CVC Capital Partners at about €2.3 billion, people with knowledge of the matter said.

Commodities

In a note, Liberum Capital said its bear case for gold is fading.

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“Why? Its price has already dropped 15 per cent since its war-related spike in March, quickly offset by the US Fed’s launch of its inflation-targeting rate hike cycle.”

Liberum said it sees little downside from here to its forecast 2023 floor of $US1630 an ounce. “So, is there a bull case to consider here? History shows that gold’s price is typically hit hard by either robust aggregate demand growth or recessions.

“There is, however, one macro-backdrop that promises a ‘sweet spot’ for price outperformance: when US/global growth remains weakly positive, stalked by risks like stagflation, trade anxiety or war. Sound familiar?”

Gold closed in New York near $US1755 an ounce on Friday.

Timothy Moore writes on monetary policy, equities, commodities and currencies. He is the overnight markets editor and writes Before the Bell. Connect with Timothy on Twitter. Email Timothy at timothy.moore@afr.com

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