China is back Monday after the lunar new year holiday but US markets are out for Presidents Day. That means we won’t really know if Friday’s recovery in stocks can gain real traction until US markets open Tuesday night our time.
The Chinese open around midday Monday is going to be a big one for Asian markets. What Chinese traders will make of the past week’s volatility is hard to say. No doubt policy-makers in Beijing will be relieved that stocks and crude oil finished the week in a much healthier position than at the low point of the market’s weakness last Thursday.
Nothing like a wild rumour of an OPEC and non-OPEC meeting to light a fire under the short sellers and outright bears in this market.
No doubt traders on the ASX are glad of the recovery as well. While the ASX fell 4.24% for the week ending at 4pm Friday, futures markets rallied 1.9%, 87 points, on Friday night to close at 4,785. Traders in Tokyo might be looking for a reprieve as well after the Nikkei crashed 11% last week.
What will the week ahead hold?
Can gold’s rally continue, will oil falter under $30, has USDJPY made a low and what of emerging markets, stock weakness, and commodity prices more broadly?
It’s a huge week with plenty for traders to get their teeth into locally and internationally. We have six different Fed speakers, loads of data around the globe and then the markets themselves.
Oil, best day in years Friday, but another bad week. Nymex crude had an amazing day Friday rising 12%. That’s its best one day rally since 2009 apparently. Yet such is the nature of these interesting but essentially useless statistics that the price of crude is still below $30 a barrel. In fact Nymex rrude actually lost 6% in price terms last week.
So what gives? Could this be the type of viscious price action we often see near a bottom? Or do the day traders just have the tiger by the tail and these wild swings are just a result of short term positioning? That’s a hard question to answer but the rally started Thursday with talks of coordinated cuts involving OPEC and Russia. But can they really do a deal or will this prove to be furphy? BAML says it’s the latter, and Elena Holodny reports the Saudis aren’t ready to fold yet. So we’ll have to wait and see.
Stock market bottom? I was surprised by the bullish tone of my 6 things for traders Friday. That forced me to have a look at a few of my indicators to confirm what I was feeling was more than just a “blink”. It was so I tweeted I was getting bullish stocks on the ASX and thought the SPI would rally. First mission accomplished with Friday night’s high and close 6 and 10 points shy of my SPI targets.
But it’s not just me. Well-known market Tom Demark told CNBC Thursday that the stock market would take a “final dive” in the next few days. That’s a big call. So the signal from Friday’s funky rally in oil and the positive tone on Wall Street suggests traders might just be sick of selling, exhausted if you will. At least for the moment.
But as Business Insider’s founder Henry Blodget reminded everyone again last week, stock valuations are still stretched and stocks could fall another 30% just to get back to average. The bounce may come, or it might not. Either way though, it seems many traders might just see it as a pause that refreshes this grizzly bear market.
Australian Calender – (courtesy NAB Economics, our enphasis)
Thursday’s Labour Force report the main draw card, but can it be believed? RBA Board minutes Tuesday, RBA Assistant Governor (Financial System) Malcolm Edey speaks Thursday on “The current risk environment”.
Australian Labour Force – January The headline act for Australia’s calendar this coming week will undoubtedly be Thursday’s labour force report for January. Not only did the labour market surprise on the positive side for much of last year, but the November and December releases took the surprise factor to a new level with employment growth running at an annual rate of 2.6%, even beyond the growth rate of the economy that was 2.5% over the year to September quarter. Rarely does employment growth exceed economic growth, implying that the employment data has either been overstated, or that GDP has been understated.
But the NAB also says that because of the ABS sample rotation issues we could get another incredible jobs print – perhaps forty or fifty thousand.
International Calender (also courtesy NAB Market Economics)
NZ: PSI services Monday, early a.m. Wednesday dairy auction, PPI, ANZ job ads and ANZ-RM consumer confidence all Thursday, finance Minister Bill English’s parliamentary testimony on HYEFU.
China: Jan lending-money supply January reports still due, trade Monday, CPI/PPI Thursday.
US: Empire State manufacturing Tuesday, NAHB housing market index, TIC flows Tuesday, housing starts, PPI, industrial production, FOMC January 26-27 minutes Wednesday, Philly Fed index, Jobless claims, Leading index Thursday, then CPI Friday. Six Fed speakers scheduled, US caucuses/primaries continue with Nevada and South Carolina next Saturday.
Japan: Q4 GDP, Industrial production Monday, Machine orders/Machine tool orders both Wednesday, Trade and BOJ’s Ishida speaks Thursday.
Euro: Trade Monday, Germany/EC ZEW survey Tuesday, current account, ECB account of last monetary policy meeting Thursday, EC consumer confidence Friday. ECB’s Draghi speaks in EU Parliamentary Committee Monday, EU Leaders Summit on Thursday.
UK: CPI, PPI Tuesday, Labour market Wednesday, retail sales, public finances Friday.
Canada: A quiet week ahead of CPI and retail sales Friday. Manufacturing and existing home sales Wednesday, international securities transactions Thursday, wholesale trade sales Friday.