Asian Open: Santa’s rally back on track?

Asian Futures:

• Australia's ASX 200 futures are up 22 points (0.3%), the cash market is currently estimated to open at 7,335.90
• Japan's Nikkei 225 futures are up 310 points (1.09%), the cash market is currently estimated to open at 28,765.60
• Hong Kong's Hang Seng futures are up 62 points (0.26%), the cash market is currently estimated to open at 24,045.66
• China's A50 Index futures are up 13 points (0.08%), the cash market is currently estimated to open at 15,800.21

UK and Europe:

• UK's FTSE 100 index rose 107.62 points (1.49%) to close at 7,339.90
• Europe's Euro STOXX 50 index rose 139.09 points (3.36%) to close at 4,276.20
• Germany's DAX index rose 433.15 points (2.82%) to close at 15,813.94
• France's CAC 40 index rose 199.61 points (2.91%) to close at 7,065.39

Tuesday US Close:

• The Dow Jones Industrial rose 492.4 points (1.4%) to close at 35,719.43
• The S&P 500 index rose 95.08 points (2.08%) to close at 4,686.75
• The Nasdaq 100 index rose 479.503 points (3.03%) to close at 16,325.66

Santa’s rally back on track?

More data is flowing through that, whilst Omicron is more easily transmissible, its symptoms may be less severe than Delta. The usual risk-on pattern ensued with global equity markets extending gains, bond yields rising (as investors sold their bonds to take on higher risk) and the VIX falling to an 8-day low of 22. Furthermore, reports surfaced near the end of the US session than Republican Leader Mitch McConnell says a deal has been reached with Chuck Schumer to raise the debt ceiling.

Tech stocks were the clear leaders with the Nasdaq 100 rising around 2.7%, the S&P 500 up around 2% and the Dow Jones up by 1.3%. Futures markets point to another positive session today in Asia and, dare we say, Santa’s rally could be set to kick off as we head towards Christmas now the covid clouds are receding.

Commodity currencies ruled the overnight session

Given the risk-on vibe and inflationary signs in US data overnight, we would have expected USD/JPY to perform better than it did. Still, whilst it remains above the 112.53 low our bias remains bullish, but perhaps we’ll need to see a hotter CPI print on Friday to get its juices flowing. USD/CHF printed a spinning top Doji but we’re hoping a higher low can now for, above 0.9200 before its next leg higher towards 0.9300.

Strong Ivey PMI aids CAD ahead of today’s cash rate decision

Markets are currently pricing five hikes next year, making them the most hawkish central bank among the FX majors. Whilst Omicron fears are abating we do not think they will decide to hike today, but that’s not reason to not be on guard for one as it could still come as quite the surprise. So we’re interested to hear their take on the new variant and what impact (if any) it may have on policy next year because if they brush those concerns aside then it could be as good as a hike.

Potential bear-flag on AUD/CAD

ASX 200 Market Internals:

The ASX 200 hit a 5-day high yesterday and closed within the 7311 – 7337 resistance zone and is expected to open near the top of this zone today. Today’s vias is bullish in line with yesterday’s sentiment, whilst prices hold above 7270.

ASX 200: 7313.9 (0.95%), 07 December 2021

• Energy (2.07%) was the strongest sector and Utilities (-0.08%) was the weakest
• 10 out of the 11 sectors closed higher
• 5 out of the 11 sectors outperformed the index
• 159 (79.50%) stocks advanced, 37 (18.50%) stocks declined
• 57.5% of stocks closed above their 200-day average
• 42.5% of stocks closed above their 50-day average
• 39% of stocks closed above their 20-day average

Outperformers:

• + 9.92% - Pointsbet Holdings Ltd (PBH.AX)
• + 9.91% - Zip Co Ltd (Z1P.AX)
• + 7.66% - Polynovo Ltd (PNV.AX)

Underperformers:

• -6.37% - Magellan Financial Group Ltd (MFG.AX)
• -4.30% - Nickel Mines Ltd (NIC.AX)
• -3.15% - Lynas Rare Earths Ltd (LYC.AX)

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