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US euphoria v metals caution

The infectious impact of a euphoric break into new high ground on US markets is likely to carry the day, delivering a stronger opening for the ASX 200.

The stars aligned for US stock markets last night with further progress towards tax reform; Jerome Powell confirming he endorses a pragmatic approach to low headline unemployment rates and low interest rates plus a 17-year high in the Conference Board Consumer Confidence Index. Perhaps most significantly of all, markets were ignited by a break out of the recent trading range, with buyers responding to the fear of missing out.

Local investors will be weighing the likely impact of this “US centric” bout of euphoria against a sobering bout of profit taking in most industrial commodities. It may be up to local bank stocks to follow their US counterparts and contribute some heavy lifting to a rally in the local ASX 200 today. This seems likely, although optimism might be tempered by the risks associated with the looming reality of a political inquiry into the financial industry.

Last night’s risk on move, together with a complete lack of reaction by gold or the Yen is confirmation that markets will now ignore Korean missile tests unless there is evidence that the risk of actual conflict is escalating.

Oil markets remain on hold as they wait on the outcome of this week’s OPEC meeting. Bulls may be hoping that OPEC adopts some Jerome Powell like caution and flexibility with a preparedness to adapt the production ceiling to future circumstances to achieve a Goldilocks not too hot, not too cold outcome for oil prices

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