Stocks in the US rallied again on Friday to cap off a stellar week’s trade.
SPI200 futures however, suggest a mildly negative start to trade, losing 5 points. The Australian dollar, on the other hand, starts the week above 72 cents and uncommonly strong after the US dollar hammered the euro and sterling on Friday night. Crude is lower, iron ore rallied and Dr Copper made another 6-year low.
First the scoreboard:
- Dow: 17,806.37, +73.62, (0.42%)
- S&P 500: 2,087.08, +5.84, (0.28%)
- SPI200 Futures: 5,259 -5 (0.1%)
- AUDUSD: 0.7231 -0.0030 (0.41%)
And now, the top stories:
STOCKS – Santa Claus Rally. – Stock markets recovered strongly last week after the swoon in Asian trade Monday in the wake of the Paris terrorist attacks the weekend before. In the US by the end of trade Friday the Dow had put on an impressive 376 points for the week up 2.15%. But it was up an incredible 614 points off the lows. The Nasdaq and S&P both ended the week up more than 2%. In Germany the Dax has broken a mjor downtrend line to finish up almost 4% while the FTSE was 3.5% higher after the miners found some love.
The wash-up is that the ASX had a stellar performance, rising 205 points over the week a gain of 4.05%. Off the low, the rise was around 280 points or 5.6% over the week.
Can it continue? This trader reckons it can and that the US market is on its way to new highs. If he’s right, the ASX will get dragged along for the ride.
FOREX – World Trade and the Aussie Dollar. – Despite the solid rally on stocks last week it looks like global trade is still tanking. We had news on Friday that the Baltic Dry Index, a measure of global shipping rates, made a new all-time low on Friday.
Now, of course there are some supply issues here. Just like crude oil, there has been a build up in capacity over demand. But this is a clear sign that the fears about Chinese and global growth the OECD worried about two weeks ago remain a clear and present danger. Traders today will be wondering how, against this back drop, the Australian dollar could have rallied last week.
CENTRAL BANKS – More Shock and Awe from the ECB. The euro was hammered on Friday night after ECB president Mario Draghi gave his latest promise of “whatever it takes” to get inflation back above 2%. Draghi said of the next ECB meeting on December 3 that: “If we decide that the current trajectory of our policy is not sufficient to achieve our objective, we will do what we must to raise inflation as quickly as possible.“
That saw the euro fall out of bed trading down from a high of 1.0742 to sit this morning at 1.0638. Some think it’s now on its way to parity. Mark Burgess, chief investment officer at Columbia Threadneedle Investments, told Reuters that: “With the ECB easing policy, I would be very surprised if the euro didn’t fall through parity.”
But, showing once again the difficulty of managing the EU economy for the ECB, Bundesbank president Jens Weidmann was focused on the stimulatory power of the crash in crude rather than the deflationary aspect. As a result he saw “saw “no reason to talk down the economic outlook and paint a gloomy picture”.
DID YOU KNOW – there’s a special FED meeting tonight? Yep, I missed it too. But the guys at Forexlive pointed out yesterday that last Thursday night our time, the Fed announced a special meeting for this evening, November 23, to “Review and determination by the Board of Governors of the advance and discount rates to be charged by the Federal Reserve Banks.” There is some market chatter that the Fed might go early on its rate hike. But given their communication strategy has worked so well and the market is primed for a mid-December liftoff, this sounds more like a procedural meeting. One to watch though.
WILD MARKETS – Normal isn’t normal. If you’re feeling like you are having a tough year trading these markets, you’re not alone. There is no doubt that the volatility in markets and how they handle the news is weighing on traders. One day good news is good news and the next day bad news is good news, or good news is bad news. Anyway “normal isn’t normal anymore” says Nick Savone, a managing director in Morgan Stanley’s New York equity division. He highlighted “a seemingly random and captivating walk of confusion” in a note over the weekend. The bad news is while we head toward year-end and a Fed liftoff, things could get worse.
Now the DIARY FOR THE WEEK AHEAD. It is a huge week for Australia with the release of construction work done and private new capital expenditure. They both feed into the national accounts next week and are both relevant to discussions about the economic transition in the Australian economy. Governor Stevens’ talk tomorrow is also important. But there is also plenty more. You can find it all in the diary for the week ahead.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Last week’ department store results looked like a bit of a “green shoot” for a revival in consumer spending. V shaped bounces don’t happen in the post GFC economy. However, both David Jones and Myer produced better than expected results even though they were partly about discounting and specials to clear old stock. This is a sign that the improving Bureau of statistics employment data may not be as wide of the mark as some believe.
In Myer’s case, it produced a 3.9% increase in like for like sales in the first quarter. This produced a 4.5% jump in the share price on Friday on strong turnover as indicated by the box below the chart.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC
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