6 things Australian traders will be talking about this morning

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Stocks in the US were down mildly last night after touching year-high levels last week.

That mild pullback belies the golden cross formation (see below) and suggests that the local market is going to open on the back foot today.

The June SPI 200 contract is off 0.5%, 25 points, but with iron ore drifting again, China announcing measures to curb rampant speculation on commodity markets (also see below) and crude lower, the risk is the ASX 200 slips more than anticipated today. A slip back below 5213 would suggest a move toward 5132 technically.

On forex markets, the Aussie slipped below 77 cents yesterday but it’s back above the line this morning after the US dollar drifted a little in the first 24 hours trade for the week. That’s not entirely a surprise given USDJPY climbed all the way to the mid 111s and euro fell to 1.12.

Here’s the scoreboard (7.39am):

  • Dow: 17,977, -27 (-0.15%)
  • S&P 500: 2,088, -4 (-0.18%)
  • SPI200 Futures (June): 5,211, -25 (-0.5%)
  • AUDUSD: 0.7714, -0.0025 (-0.32%)

Now, the Top Stories

1. The bulls are girding their loins after the S&P 500 just experienced a golden cross. Bob Bryan from BI New York reports that on Monday, the S&P 500 experienced a “golden cross”, or a move of the 50-day moving average above the index’s 200-day moving average while both moving averages are rising.

The bullish cross gave a bad lead last year but Bryan quotes research from Bespoke Investment Group saying “for the S&P 500, though, performance has been fairly bullish. There have only been 16 prior ‘golden crosses’ for the S&P in the index’s history, so they’re very rare.”

IF the signal works this time, that will fundamentally change the outlook for global markets and the local ASX to a much more positive tone.

2. Forex punters are mega-long the Aussie dollar. No wonder the Aussie ran out of a little steam last week up above 78 cents. It seems every speculator and his dog is long Australian dollars. That’s the latest data from the CFTC commitment of traders report via the ANZ which shows speculative accounts net long position are the highest they’ve been since the Aussie’s sell off began in 2014.

It’s not a guarantee the Aussie falls. But it does reflect that much positivity is baked into Aussie prices at the moment. I’ve got more here – including a couple of nice charts.

3. It’s no surprise the Saudis are trying to revamp their economy because this research house says it’s the end of oil as we know it. Last night we got further details about Saudi Arabia’s plans for its economic future. It’s a future – “Vision 2030” – which aims to curtail the Kingdom’s addiction to oil, reports Elena Holodny.

That’s a wise move according to Bernstein Research, which says the end of oil as we know it is coming in 2030. Linette Lopez reports that the firm says while eventually the world won’t run out of oil, it will be a world where people don’t really want oil anymore. They have 3 fairly cogent reasons and just to complicate things, Bernstein says there will be a last hurrah – a surge in demand for oil – around 2020.

For the moment though, things are so bleak in the oil industry, an offshore drilling company got a 90% discount on a $700 million rig.

4. Central banks and inflation are front and centre again this week. The ANZAC day holiday meant that I didn’t do a diary of the week ahead on Sunday. But it’s a very important week both offshore and here in Australia. Globally the Fed starts its meeting tonight with an announcement on Thursday at 4am. No one actually expects any change in rates this month. But there is a a real chance that the FOMC hardens its rhetoric around the prospects of tightening this year – perhaps as soon as the next meeting in June. The Bank of Japan announces its decision later on Thursday and there is a real chance it tries to increase stimulus outside of negative rates. That’s what forex markets are betting anyway, with USDJPY climbing from below 108 last Monday morning to above 111 this morning. Helpfully, or perhaps not for the BoJ, Thursday also sees the release of Japanese consumer price data.

Speaking of which, we get the Australian first quarter CPI tomorrow at 11.30am. The NAB expects headline CPI to be a low +0.1% q/q, 1.6% y/y. Underlying inflation is also expected to be subdued at 0.5-0.6% q/q, 2.0% y/y (in line with the RBA February SoMP track).

Here’s Myles Udland’s excellent look at the week ahead US-style.

5. China is a punters’ paradise, with commodities now the main game. Ben Moshinsky reports that retail investors who have “been burnt by several stock market slides over the past year, they’re going straight into the volatile commodity futures market”. Analysts at BAML say volume is so high, it’s dwarfing the turnover on both the Shanghai and Shenzhen Stock Exchanges.

You just have to see the chart showing the spike in volume in 2016.

But as if on cue, the FT reports that yesterday China announced it is clamping down on the commodities frenzy. Michael Coleman, co-founder of RCMA Asset Management in Singapore, told the FT that Chinese traders “don’t want to buy the stock market because all of the curbs that are in place and seem to have taken the view that commodities are really cheap”.

That can only end well right?

6. Would you give up your Bloomberg or Reuters terminal? How much of the functionality and capability of your terminal do you actually use? Could you get what you need elsewhere, for free, or at lower cost? As someone who works mostly from a home office and has a huge data need, but a disaggregated approach to collecting and curating that data, I can promise you that except for some small niche markets you probably can.

Myles Udland reports the team at Morgan Stanley reckon my question – their question – is really important not only for Bloomberg and Reuters revenue streams but also for their own research. It would be an uncomfortable world for traders without their terminals that can do everything. But in an increasingly tight environment, Morgan Stanley say “low interest rates and depressed capital markets activity are requiring banks to tightly manage expenses”. The question for managers is going to be whether every dealer needs everything at their fingertips or whether a more limited offering and, heaven forbid, shared terminals, are the future.

Key data for the past 24 hours (with thanks to BNZ markets)
JP: Nikkei PMI manufacturing, Apr P: 48.0 vs. 49.5 exp.
GE: Markit PMI manufacturing, Apr P: 51.9 vs. 51.0 exp.
GE: Markit Services PMI, Apr P: 54.6 vs. 55.1 exp.
EC: Markit PMI manufacturing, Apr P: 51.5 vs. 51.9 exp.
EC: Markit Services PMI, Apr P: 53.2 vs. 53.3 exp.
US: Markit PMI manufacturing, Apr P: 50.8 vs.52.0 exp.
GE: IFO Business climate, Apr: 106.6 vs. 107.1 exp.
US: New home sales, Mar: 511k vs. 520k exp.

You can catch me on Twitter.

And now from CMC Markets’ Ric Spooner is today’s Stock of the Day

Apple Inc

The S&P 500 heads into this big profit reporting week on a lofty 17.8 times forward earnings. The index is probably going to need earnings to beat expectations to sustain these levels and set up another assault on the record 2134 level. It closed last night at 2088.

Apple will be important for market confidence. Its results are due tomorrow and the market is pessimistic. Earnings per share are expected to be down 8% on the same quarter last year. IPhone sales appear to be struggling against a background of a mature market in developed economies and a preference for cheaper phones in emerging economies.

The result is going to drive what happens to the share price this week. However, the chart suggests Apple is positioned for a pretty positive reaction if the result is in line or a bit better than expected.

Momentum indicators are over sold and price is sitting at the top of a potential support zone. This is made up of the 38.2% Fibonacci retracement, the measuring target for the recent double top pattern and the early March peak.

Ric Spooner, chief market analyst, CMC Markets

You can follow Ric on Twitter @ricspooner_CMC

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