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Market Opener – 07 Dec 2018

Local Markets Commentary
The Australian market opens Friday trade following overnight international equities trade which largely reflected perceptions of an escalation of US-China tensions, a reported preliminary production cut accord among OPEC members (prior to ally discussions later today and tonight), ahead of influential data out of China over the weekend and in the US tonight. 

In overnight commodities trade, oil dropped.

US (February) gold futures turned slightly higher. 

Iron ore (China port 62% Fe) swung lower. 

LME copper continued to decline. Nickel slid. Aluminium also picked up the pace of its latest pullback.

The $A appreciated to ~US72.35c after falling to ~US72.05c early yesterday evening.

Also since yesterday’s ASX trade, Reserve Bank of Australia (RBA) deputy governor Guy Debelle told an economists conference that lower interest rates and another quantitative easing program were not unthinkable given any new need.

Locally today, AiG releases its November construction sector activity index pre-trade. 

Regionally, China is expected to publish November foreign reserves this evening, trade statistics tomorrow, and CPI and PPI Sunday.

Overseas Market Commentary
Major European and US equities markets tumbled early overnight.

However, key European indices closed at session lows while US indices settled at session peaks, the NASDAQ ultimately recording a gain.

The early falls followed the arrest in Canada yesterday of an executive of China telco Huawei.

This was initially reported as linked to US sanctions threatened against companies attempting to continue business with Iran, suggesting a critical deterioration of China-US trade progress prospects. 

Reports also emerged OPEC talks in Vienna were set to deliver a smaller-than-anticipated production cut agreement, a 1MMbbl/d reduction claimed to be the figure agreed overnight to be put to allies to the current OPEC-led output agreement later today and tonight.

This sent oil prices tumbling.

In addition, a raft of US overnight data releases came in decidedly mixed. 

These included a $US55.5B trade deficit for October, up 1.7% for the month, delivering five consecutive months of deficit growth and representing the largest deficit in a decade.

Overall US exports pulled back 0.1% to $US211B and imports rose 0.2% to a record $US266.5B.

Notably, the US trade deficit with China jumped 7.1% to a record $US43.1B.

October factory orders were reported to have dropped 2.1% following a 0.2% September rise.

September quarter productivity fell to 2.3% from 3% for the June quarter.

A private sector employment report estimated 179,000 jobs had been created in November, against forecasts of 190,000, and October’s recorded 225,000.

Weekly new unemployment claims fell by 4000, following expectations of a 10,000 decline.

A jobs layoff report calculated 53,100 planned cuts in November following 75,600 announced in October.

The influential ISM services sector activity index was calculated at 60.7, up 0.4 from a previous robust reading.

Earlier, Germany’s new data releases surprised on the upside, October factory orders rising 0.3% for the month, following a 0.1% September gain and forecasts of a 0.4% fall.

A November construction PMI switched to an expansionary 51.3, from 49.8 in October. 

Tonight in the US, November employment statistics and a consumer sentiment update are keenly anticipated, together with consumer credit data.

Elsewhere, UK parliamentarians are considering potential changes to proposed arrangements covering the separation from the European Union (EU).

A vote is scheduled for Tuesday next week.
7/12/2018 7:00:00 AM

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