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Over in the US on Tuesday markets pulled back from the recent rally to end the day lower as investors await key inflation data out in the US on Wednesday US time. The Dow Jones fell 0.35% on Tuesday, the S&P500 lost 0.3% and the tech-heavy Nasdaq ended the day down 0.25%. The inflation data out on Wednesday is a key economic reading as it will influence the Fed’s last rate decision for 2024 which will be handed down at the FOMC meeting between December 17-18.

In Europe overnight, markets closed lower, snapping an 8-day winning streak as investors in the region also await the final inflation reading of the year from the US. The STOXX 600 fell 0.52%, Germany’s DAX lost 0.08%, the French CAC fell 1.14% and, in the UK, the FTSE100 ended the day down 0.86%.

Across the Asia region on Tuesday, it was a mixed session across the markets as fresh stimulus talks out of China boosted some regions to a positive close. China’s CSI index rose 0.74% on Tuesday, Japan’s Nikkei added 0.53%, while Hong Kong’s Hang Seng fell 0.5%.

China’s trade balance data out for November yesterday indicated further economic struggle out of the world’s second largest economy with imports declining 3.9% while exports rose 6.7% which was sharply lower than the 12.7% growth in October.

The ASX had a significant rally in afternoon trade as investors welcomed the RBA holding the nation’s cash rate at 4.35% for the last meeting of 2024, meaning it will remain at this level until the RBA meets again on the 18th February, 2025. Despite the afternoon rally, the key index still closed 0.4% lower on Tuesday as tech and financial stocks weighed on the key index.

The afternoon rally was the result of investors welcoming RBA governor Michele Bullock’s comments of ruling out a rate hike this period as inflation pressures continued to fall including economic growth and wages growth easing since the November meeting.

Investors bought into the miners yesterday on hopes of further stimulus out of China reigniting demand for Australia’s key commodities. Any news and promises out of Chinese officials regarding stimulus packages and boosts to the Chinese economy have led to gains for the local mining sector over the last 12-months, however, it is a reminder to be cautious about buying into the hype rally before seeing material flow through of the stimulus to economic recovery in the world’s second largest economy.

Australian business confidence data also weighed on investor sentiment yesterday after data revealed business confidence plummeted by 8 points in November to -3 points, reversing October’s gains and signalling tougher market conditions and sentiment from Aussie businesses last month.

Insurance Australia Group fell over 1% on Tuesday after the insurance provider said it intends to defend itself against a class action brought to the Supreme Court of Victoria.

What to watch today:

• Ahead of the midweek trading session here in Australia, the SPI futures are anticipating the ASX will open the day down 0.32% tracking Wall Street’s pullback overnight.
• On the commodities front this morning, oil is trading 0.7% higher at US$68.83/barrel, gold is up 1.16% at US$2691/ounce and iron ore is up 2.14% at US$106.34/tonne.
• The Aussie dollar has further weakened overnight to buy US$0.64, 96.96 Japanese Yen, 50.37 British Pence and NZ$1.10.

Trading Ideas:

• Bell Potter has increased the rating on Pilbara Minerals (ASX:PLS) from a hold to a buy and maintain a 12-month price target on the company of $2.95 following recent share price weakness due to the recent high short position in the company reducing in recent weeks. Bell Potter’s analyst sees lithium markets have stabilised and commodity prices have marginally improved which places PLS as an attractive opportunity given its low-cost asset in a tier one jurisdiction.
• Trading Central has identified a bullish signal on Beacon Lighting (ASX:BLX) following the formation of a pattern over a period of 28-days which is roughly the same amount of time the share price may rise from the close of $3.05 to the range of $3.49 to $3.59 according to standard principles of technical analysis.