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Markets up but ASX flashes red

A miss on US factory orders data didn’t deter buyers and both European and US markets added to recent gains in overnight trading. Oil prices tanked again as OPEC dropped further hints that production cuts may come to an end. Asia Pacific index futures are pointing to opening gains, but the Australia 200 is an exception. A surging Australian dollar may be the culprit.

Tech shares lifted on news Microsoft is bidding for coding community GitHub, and Apple commenced its annual developer love-in. However gains were broad based and widespread. Bonds edged higher as investors focussed on improved economic prospects, and currencies markets marked time.

Commodity exposures are in focus. Crude oil prices are down 10% in less than two weeks, yet local oil and gas stocks are yet to reflect the moves. Gold and other precious metals stepped lower again despite a slightly lower US dollar and recent support for gold miners. However base metals remain well bid, potentially reflecting the recent run of stronger economic data around the globe.

Strength in key commodities may explain the almost two US cent jump in the Australian dollar since Thursday. In turn this could underpin the sell down in Australia 200 futures as international investors face extraordinary gains and the temptation to lock them in.

The RBA will almost certainly keep rates on hold today. Local investors will look to tomorrow’s Caixin services and composite PMIs, and Australian national accounts data for near term direction.

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