– It has been a really quiet few months, with volatility as low as it gets, but stocks in the US ended the week higher with the S&P up 1% after falling 1% the previous day – something we haven’t seen in months.
– What drove the rally was the emergence of a clear indication that however heinous the shooting down of MH17, is looks like as huge mistake by the rebels in eastern Ukraine, as Business Insider reported yesterday.
– That is important because it puts the shooting down of the plane in a different light than if it had been intentional. Key here is that while the pressure on Russia remains intense, with condemnation in the UN Security Council and the threat of further sanctions by US President Obama, traders are betting the immediate geo-political risk from this incident appears to have receded.
– The question of course, and one that will be a hot topic in dealing rooms all over the country, is what the next steps will be and what the UN or individual countries might do in the days and weeks ahead.
– For the moment though, trade today is likely to be dominated by the Japanese holiday and bounce from Friday.
– At the close, the Dow was above 17,000 with a gain of 123 points or 0.7% at 17,100. The Nasdaq rose 1.57% to 4,432 and the S&P 500 was up 1.02% or 20 points higher at 1978.
– In Europe, stocks were more mixed with the FTSE up 0.16% at 6,749 and the CAC rising 0.44% to 4,335, but the DAX was lower, down 0.35% at 9,720.
– On the ASX Futures market, the SPI 200 September contract was up 22 points to 5,506 bid after the US moves. It will be an interesting today given the enduring tension but equally because Iron Ore has reversed course to end the week down $1.75 tonne to $95.13. That’s a long way from last week’s high at $98.18 – traders will be watching Atlas Iron, BC Iron, Arrium and Fortescue Metals today.
– In Asia, the Nikkei was down 1% after the moves Thursday night but there will be no trade today given the holiday. The Hang Seng was 0.28% lower and the Shanghai market was up 0.17%.
– In a sign of an enduring economic disconnect between bonds and stocks, higher rates were seen with US 10s up 3 points to 2.48% but still below 2.50%. German Bunds rallied a point to finish the week at 1.16%, its lowest close in more than a year.
– On FX markets, the Aussie rallied with stocks and is back at 0.9392. Most traders expect it to be capped below 0.9450 but its strength continues. The Euro rallied back to 1.3526 and USDJPY closed at 101.32. Sterling bounced strongly from its lows to 1.7082.
– On Commodity markets, as noted above, Iron Ore has reversed sharply of last week’s highs. September Newcastle Coal slipped 25 cents a tonne to $67.65.
– July Nymex Crude hardly moved, finishing at $102.66 while Gold slipped with the stock rally to open the week at $1310.47 oz. Silver is sitting at $20.75 and Copper lost another 4 cents to $3.18 lb. On the Ags, it was more volatility after last week’s slight hiatus with Corn down 2.17%, Wheat crashing 3.36% and Soybeans quiet, rising 0.17%.
On the data front, it is very quiet today with a holiday in Japan, nothing in Australia and then PPU in Germany tonight.
There are a few important data points this week however and you can find our full calendar here
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Newcrest looks like a stock to watch this week given that:
- The gold price will be a key focus given the situation in Ukraine and with the US CPI figure due for release on Tuesday night Australian time;
- Newcrest’ production report will be released on Thursday; and
- The chart has arrived at a potential inflection point in the “neck line” of a potential inverse head and shoulder pattern. For chartists, a clear break above this neck line resistance would be a bullish indicator. The reverse also applies. Rejection of the resistance line this week would be a sign of short term weakness.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC