After a big down day for Australian stocks yesterday, and a wild ride in Shanghai where the Composite index swung from sharply negative to positive and back, stocks offshore had a much quieter night last night.
The big US indexes finished largely unchanged with a mildly positive bias. In Europe the bulls might have been disappointed though as the indexes failed to capture the early rally in trade.
All up though the ASX is likely to have a better day given futures performance, although watch out for the energy sector after crude fell another 2.67% overnight.
Elsewhere the Aussie is lower as the US dollar strengthens, iron ore’s record run came to an end, copper recovered a little and interest rates are fairly stable here in Australia and in the US.
So, the scoreboard (8.12am):
- Dow: 17,158.86, +9.72 (0.06%)
- S&P 500: 2,015.66, +3 (0.15%)
- SPI200 Futures (March): 5157, +15 (0.3%)
- AUDUSD: 0.7157, -0.0031 (0.38%)
And now the top stories:
1. Can the Australian stock market hold important support? After holding in well to end 2015, while the US market fell, and then outperforming on Monday, Australian stocks played catch-up yesterday with big fall of 1.7% for the ASX200 index. That performance wasn’t exactly a shock to some of us but it’s taken the index back toward the support of the old downtrend line it broke out of in late December. It should hold today given March SPI futures are up 15 points. But if the level breaks, trader sentiment will likely sour even further.
2. The blame game over Dick Smith’s demise has begun. The death of an icon is often felt personally. That seems to be the case with the demise of Dick Smith. But it’s too easy to blame the private equity firm that refloated the company back in 2014. I’ve had a look at just where the blame should lie here.
3. We’re back to a China capital flight doom scenario. That’s the inevitable consequence of the Chinese central bank’s clear aim to let the yuan weaken further, says Linnette Lopez from BI US. It’s hard to disagree because investors won’t want to sit around and watch the value of their investments fall in US dollar, or other currency terms. So they’ll be getting the heck outta Dodge. More here.
4. Crude oil is collapsing again. Oil is down again, losing another 2.42% last night and breaking the uptrend line since the December low. Reuters reports that’s because after rallying on initial fears of geopolitical tensions Monday, traders are now focused on the fact that the Saudi-Iran split dashes chance of OPEC deal to curb oil glut. Crude is a vital ingredient in central bank expectations of inflation starting to rise this year. So the Fed, ECB, BoE, BoJ and RBA will all be watching closely as well.
5. A successful hedge fund is closing because the world is being swamped by dodgy data. This is really interesting. We all know the trouble the ABS has with Australia’s monthly jobs data. But Nevsky Capital, a 15-year-old London based hedge fund, announced it is closing because the trouble with data has gone global. Specifically, “Data releases have become much less transparent and truthful at both a macro and a micro level,” Nevsky said. More here.
6. The Aussie dollar is getting hosed again as the US dollar rallies. The Fed won’t like that. The Australian dollar is back at 0.7160, off its overnight low of 0.7133 but down around 1.5 cents in the first couple of days trade for 2016. That weakness is in part because of concerns about China but it’s also because the US dollar is surging again. The euro is down 2 cents this week at 1.0747, sterling’s crash continues as it sits at 1.4670 and the US dollar index is up 1.4% this week.
That’s kind of good news for the Australian economy which benefits from a lower Aussie dollar. But a stronger US dollar is going to complicate things for the Fed, says the Wall Street Journal’s Steve Russolillo. That’s because a stronger dollar impacts the debate about how far and how fast the Fed moves rates higher this year. More here.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Dick Smith’s problems have led to a major upgrade in the outlook for JB Hi-Fi. The stock has rallied more than 5% over the past 2 trading sessions.
The near term impact for JBH may be an improvement in margins as price pressure from Dick Smith’s aggressive stock clearance program winds back. Beyond that, JB may enjoy reduced competition as Dick Smith either closes stores or shuts down altogether. This improved future outlook is likely to be taken into account when the market assesses JB Hi-Fi’s first half results scheduled for release on 8 February.
Ric Spooner, chief market analyst, CMC Markets