Global Markets Overview – December 29, 2014

A trader works on the floor of the New York Stock Exchange July 17, 2014. U.S. stocks fell sharply lower on Thursday, with the S&P 500 posting its biggest one-day percentage drop since April 10 on news that a Malaysian Airlines passenger jet crashed near the Ukraine-Russia border. The Dow Jones industrial average fell 161.39 points or 0.94 percent, to end at 16,976.81. REUTERS/Brendan McDermid Reuters/Brendan McDermid

Asia in for a choppy session

US equities continued to drift higher on Friday despite most global markets being closed for Christmas and Boxing Day holidays. In fact, US equities went on to print fresh record highs again with investors happy to continue following the trend. Data was also limited in that time but there continued to be some commentary out of key emerging markets. The oil price plunge seems to be impacting even Saudi Arabia itself where the country has pledged wage curbs to counter oil prices and the likes of Kuwait are set to hike prices of key utilities next year. Meanwhile Russia's Economy Minister suggested rates should be cut in the first quarter to counter the impact of oil prices. Already there has been a lot of talk about GDP shrinking next year but the country seems more focused on defending the ruble for now. China's industrial profits data, released on Saturday, showed a 4.2% drop which was worse than the previous month's 2.1% fall. With data continuing to show strain, the country is reported to be looking at waiving reserve requirements for some banks temporarily as data continues to deteriorate. There have also been suggestions the People's Bank of China will adjust bank deposits calculation from next year.

AUD remains under pressure

While equities drifted higher, risk currencies have remained on the backfoot with AUD/USD threatening to break the $0.8100 handle yet again. The pair traded as low as $0.8088 last week and could be headed back in that direction this week. The key risk event will be Greece's final attempt to elect a president. Remember, if this fails and we have to go to an election, anti-austerity parties are likely to take leadership. This would not be an ideal situation for a continent that is still trying to dig itself out of a hole. Apart from that, we are in for a quiet week all round which is also quite short due to the New Year's related bank holidays.

Flat start for ASX 200

Ahead of the open we are calling the ASX 200 up 0.1% at 5399. Once again, we are likely to see choppy trade with limited activity due to the holidays. There are reports suggesting the government is considering a tax on overseas internet purchases. This would be an interesting development for domestic retailers. In the commodities space, gold spiked (heading back towards $1200/oz) on China stimulus speculation and that will likely keep gold names bid today. However iron ore names and energy plays will remain choppy with the two commodities continuing their tough run.

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