A better night on global stocks after ECB president Mario Draghi promised more easing in Europe.
That helped the DAX recover from early losses after a really weak Asian lead where the Nikkei and Shanghai composite both collapsed into the close.
The ECB-induced positivity and the massive 4.87% bounce in the price of oil last night has helped propel US stocks higher. But they did not recover the losses from the previous day. So it’s a tentative recovery so far.
That hasn’t hurt the local futures market though, with the ASX SPI 200 March contract suggesting a 29 point gain to kick things off this morning.
On forex markets, the Aussie dollar had a ripper and is back at 70 cents as forex traders react to the ECB news (euro slightly lower) and the improved sentiment of stocks and commodities. That’s helped the Kiwi and Canadian dollars both put on a ripping 1.5% overnight.
That, and the fact that copper is up 2% and commodity prices broadly have risen, should help the ASX have a good day. Perhaps even eclipsing what futures are currently pricing.
Here’s the scoreboard (8.04am):
- Dow: 15,882, +114 (+0.73%)
- S&P 500: 1,872, +13 (+0.71%)
- SPI200 Futures (March): 4,861, +29 (+0.7%)
- AUDUSD: 0.7010, +0.0101 (+1.0%)
And the top stories:
1. The ECB is promising more easing. Mario Draghi was widely pilloried for not delivering on his promise to markets late last year with a tepid easing. At least, compared to what markets expected. But last night he again signalled the ECB has no limit as to how far it can go to get Europe’s moribund economy moving.
That helped stocks surge in Europe and it’s helped the US have a better day as well. Now he has to carry his board, especially the hawks, at the March meeting.
2. Australian billionaire fund manager Kerr Neilson says the market funk is not about China. It’s easy to blame China for the market’s woes as many of us in the media have done recently, says Kerr Neilson. But the reality is that the China problems were there for all to see some time ago. Rather, Neilson reckons that investors have woken up that stocks in developed markets are over-valued and there is a big chance that “under-utilised” Chinese factories are going to chase the market abroad and drive down inflation and prices…that will hurt valuations.
I’ve got the whole story here.
3. Ray Dalio says the global growth engine is broken. You can’t miss this one on the site this morning. But it’s an important story for traders because Dalio has summed up what everyone I’m speaking to at the moment is thinking. Where’s the growth going to come from?
But that’s not why I’ve linked his thoughts. Rather, it’s because Dalio has a warning for those traders who bought on the back of Mario Draghi’s promise of more easing:
I think the monetary policy is the issue. Decreased effectiveness of monetary policy. I think that’s an important issue. Are we at the end of central banks’ abilities to squeeze out more debt or money growth? Are we approaching the pushing on a string phenomenon? I believe we are.
4. Oil had a cracking night after the boss of Saudi Aramco said prices were “irrational”. “Short term it is a very bleak picture,” chairman Khalid Al-Falih said. BUT “the market has overshot on the low side and it is inevitable that it will start turning up”.
Akin Oyedele has more on his thoughts here.
5. Not everyone is bearish and some think it’s time to buy. Myles Udland reports that stocks are probably going to rally. Or at least one strategist thinks it’s most likely that stocks are going to rally from here. Well known US strategist Peter Tchir reckons all the bad news might be baked into the cake.
As the market prices in more and more bad things happening, it starts missing the odds that NOT all of the bad things will happen.
Separately, Elena Holodny from BI US has a chart from Doug Short which puts the current selloff into perspective and shows the percentage drops off the highs in the S&P 500 since March 9, 2009. This latest stock plunge looks quite brutal relative to the other drops.
Time to buy?
6. This is a scary example of where the rubber of financial market turmoil hits the road of the main street economy. Believe it or not, the CEOs of big companies are humans too. So just like you and me, they are affected by the highs and lows of markets.
BI founder Henry Blodget reports from Davos that a billionaire who wandered by told him:
Tanking stock prices are going to scare CEOs and make them more cautious. Instead of dreaming big dreams and plotting world domination, these CEOs are going to go into self-preservation and cost-cutting mode. And then they will start firing people.
Not what the globe wants right now.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Woodside Petroleum (WPL: ASX)
Woodside unveiled a solid production report yesterday. Total production for 2015 was equivalent to 92.1m barrels of oil. Guidance for next year is in the range of 86-93m. One bright note is that Woodside has now doubled the estimate of the gas pay from the exploration find it made in Myanmar a few months ago.
Oil bounced neatly off a significant technical low on Wednesday. This suggests last night’s gains could extend further into a corrective rally (at least for a while). Yesterday’s low in Woodside also found a zone of Fibonacci extensions. The 100 day moving average has been good resistance for this stock over recent months. If we do get a corrective rally in Woodside, a move back to that average around $28-29 doesn’t look out of the question.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC
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