It was a quiet night for stocks with US markets posting marginal gains after the FOMC minutes showed the Fed is a house divided.
That points to another quiet day in index terms on the ASX 200 with all the interest once again at the individual stock level.
On forex markets, the US dollar was a little weaker but the Aussie slipped lower, while oil was higher, gold unchanged and iron ore a little firmer.
Here’s the scoreboard (8.01am):
- Dow: 18574 +22 (+0.12%)
- S&P 500: 2182 +4 (+2%)
- SPI 200 Futures (September): 5,514, +3 (+0.1%)
- AUDUSD: 0.7652 +0.0041 (+0.54%)
The top stories
1. The Fed is split over whether to raise interest rates soon. Even though many Fed presidents have been suggesting another rate cut in 2016 is on the cards, the minutes of the latest Fed meeting showed there are still strong views on both sides of the table on whether the Fed should indeed be moving, or not.
Myles Udland reckons he’s found everything the Fed worried about last month in one big paragraph.
2. The Aussie dollar slipped even though the US dollar went nowhere. Here’s an interesting one. Why did the Aussie dollar slip back to a low of 0.7611 last night and why is it languishing a little at 0.7650 this morning when the euro, sterling and yen are all flat to stronger?
Of course, 76 and a half cents against the US dollar is hardly weak, and one day’s move doesn’t mean much. But with the world watching on as the Chinese continue to berate Australia at every opportunity, I wonder if it is impacting the Aussie. Two nights ago Gideon Rachman wrote an interesting article in the FT saying Australia’s luck might be running out and it faces an interesting future balancing China and the US. Then this morning the BBC radio business report at 5am had a long article about China’s recent more belligerent tone toward Australia. That was after China called Australia “protectionist” yesterday. This kind of thing isn’t a direct impact on forex but it does impact perceptions.
3. The world’s biggest investor thinks the US stock market could get bumpy. We’ve had some talk in recent days about the potential for a melt-up in stocks but Richard Turnill, the global chief investment strategist at BlackRock, has joined the chorus that includes George Soros, Stan Druckenmiller, Jeffrey Gundlach and others in wondering just where the next driver of growth in stock returns is coming from.
He’s worried about election induced volatility and although he is optimistic, he says Blackrock is cautious because “high US valuations and strong flows into US equities already appear to reflect much of the good news. That a US market overweight has become a consensus trade increases the risk of sudden reversals.”
4.Today’s employment report is really important after wages growth continued to stall. July labour force data is out today with the market expecting around 11,000 jobs to be created. Now, of course the chances of exactly that number printing are pretty remote. That’s especially the case given the ABS seems to still have issues with sample rotation.
But after we got confirmation yesterday that wages growth in Australia is still weak, growing just 0.5% last quarter for a 2.1% annual pace, Australia needs to create more jobs if the economic transition momentum is going to be sustained.
We’ll have full coverage of the jobs data at 11.30am.
5. China’s move to weaken the yuan a year ago was the right one. Rachel Butt reports Carlyle Group’s economist Jason Thomas said in a note that while China’s move shocked everyone, and was the catalyst for the next four or five months of volatility, it seems to be paying off for the domestic economy.
“A year ago, producers’ finished goods prices were falling at a 6% annual rate,” Thomas said. “Prices have declined by just 1.7% over the past 12 months and now appear to be rising on a sequential (month over-month) basis.”
He also bullish on other areas of the economy. Interesting take and well worth the read.
6. While we are talking China, here’s why traders need to keep an eye on things. Granted China is doing a lot better than many thought just six months ago. But I wonder what is behind China’s recent uptick in belligerence in the South and East China seas and of course, toward Australia. Sure there was the adverse ruling against their island creation scheme, then the drugs stuff at the Olympics and the blocking of the Ausgrid sale. But China has also wound up the Japanese recently. BIUS has the Japanese coast guard video showing hundreds of Chinese fishing ships near a disputed island chain. Of course, the Chinese seem a little grumpy about the new US missile system that the South Koreans are deploying to protect themselves from the north.
But with an eye to history, I wonder if all these skirmishes are a distraction and the Chinese economy might actually be weaker than we all think. Alternatively, geopolitical missteps are never good for markets. So either way – China is going to remain a focus.
Key data for the past 24 hours (with thanks to BNZ markets)
NZ: PPI outputs (q/q%), Q2: 0.2 vs. -0.2 prev.
NZ: HLFS unemployment rate, Q2: 5.1 vs. 5.3 exp.
NZ: Employment (q/q%), Q2: 2.4 vs 0.6 exp.
NZ: Participation rate (%), Q2: 69.7 vs. 68.8 exp.
AU: Wage price index (q/q%), Q2: 0.5 vs. 0.5 exp.
UK: Jobless claims change (‘000), Jul: -8.6 vs. +9.0 exp.
UK: Unemployment rate (%), Jun: 4.9 vs. 4.9 exp.
US: FOMC minutes, Jul: A mixed range of views
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Blood plasma group CSL missed expectations with its profit report yesterday, leading to a test of key chart support.
Net profit after tax grew 5% to $US 1,242m. The result was hampered by losses related to CSL’s newly acquired flu vaccine business. This is not expected to break even until F18 and the market was also disappointed in growth guidance of 11% for F17 across the total group.
Overall, the business remains in solid shape. The current $1bn share buyback program is now 92% complete and is likely to be followed by another $500m.
Yesterday, the stock fell to but bounced off, trend line support just above $107. The 40 week (200 day) moving average is just below suggesting this $105/$107 level is a key support zone for CSL.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC