With US markets largely absent for Labor Day it was left to Russian President Vladimir Putin and the Saudis to spice up trade overnight with the announcement of a compact to work together on oil production.
Oil surged, and then pulled back as a result. That price action was replicated in other markets like forex where the Aussie dollar and British pound rallied and then reversed to be largely unchanged on the day.
SPI traders were a little more pessimistic however. Falls in UK, German and French markets have resulted in the September SPI futures pointing to a fall of 23 points when the market opens at 10am. That’s around a 40% cut of yesterday’s sharp 57-point rally.
No one expects any change but all eyes are on the RBA interest rate decision at 2.30pm today.
Here’s the scoreboard (7.28am):
- Dow: 18419 +18 (+0.1%%)
- S&P 500: 2171 0 (0%)
- SPI 200 Futures (September): 5,394, -12 (-0.2%)
- AUDUSD: 0.7548 +0.0031 (+0.41%)
The top stories
1. Contrary to all the doom and gloom, Goldman Sachs says the globe is close to escaping the post-GFC debt and deflation trap. When I read this piece of research from Goldman Sachs I was amazed. Not because I agreed or disagreed but simply because the argument is so far outside conventional thinking about where the US and global economy are currently sitting.
The summary is that after eight years, the global economy is finally following the United States out of the pernicious debt deflation cycle that has so gripped and characterised growth and markets over that time.
No wonder Goldman’s US economist are thinking the Fed is more likely than not to hike rates at the September meeting. Even if you disagree, this is a must read.
2. Deutsche Bank seems to agree the Fed will be hiking rates this month. Writing in their db140Weekender the team at Deutsche Bank research puts some colour around the notion that non-farms was a make or break for a rate hike this month.
They highlight the trouble of data dependence is “volatile economic indicators rarely strengthen synchronously to present the perfect opportunity” to raise rates. Long story short, they say “when the FOMC last met in July, five of these six indicators [the Fed is watching] were flashing green. It is still four out of six.”
3. We might be about to finally get an OPEC production deal now the Saudis and Russians are taking the lead. Oil surged last night as investors around the world reacted to confirmation that Saudi Arabia and Russia have held talks about the future direction of oil policy.
The two nations are going to work together and while there are no immediate plans for a production freeze as we head toward the OPEC meeting in Algiers this month, the momentum – and expectation – appears to be building for a deal.
While it means that $1 petrol might soon become a thing of the past again, the upside of the stabilisation for crude is inflation in developed nations. That’s a good thing.
4. I found the best podcast for traders and spoke to the host about the lessons he’s learnt from talking to the world’s best. Aaron Fifield was a young trader who felt he was struggling. He knew he could do better, he knew mentors could help. But he took a different path to many and he started his own podcast – Chat With Traders.
Fifield is now 88 episodes into his journey which has included chats with Blair Hull, Jerry Parker, Tom Sosnoff, Nick Radge, Nicola Duke, RealVisiontv founder Raoul Pal and even Jack Swager, the author of the Market Wizard series of books and himself a student of great traders.
I’m an avid listener to the podcast and I had a chat with Aaron to see what the big lessons he’d learned about trading were.
5. Here’s another poke in the eye for UK Brexit economic doomsayers. More news last night that the UK didn’t grind to a halt on June 24. The release of the Markit services PMI came in at 52.9, crushing last month’s 47.4 and beating all the forecasts in a Reuters poll. That’s good news but Markit said that still means the economy is going to slow to a crawl.
But at least the recent data we’ve seen has prompted Morgan Stanley to drop its call for a UK recession. Via Reuters, “the bank upped its forecast for third-quarter GDP to growth of 0.3 percent versus a prior view of a 0.4 percent contraction. Morgan Stanley sees the UK economy growing 1.9 percent in 2016 from a previous 1.2 percent”.
6. And here is your 10-second guide to today’s RBA decision. Later this afternoon the Reserve Bank of Australia (RBA) will announce its September rates decision, marking Glenn Stevens’ 109th and final monetary policy decision as RBA governor. David Scutt has a great preview here.
Key data for the past 24 hours (with thanks to BNZ markets)
AU: AIG perf. of services index, Aug: 45.0 vs. 53.9 prev.
NZ: ANZ commodity price, m/m, %, Aug: 3.2 vs. 2.0 prev.
AU: Inventories, s.a., q/q, %, Q2: 0.3 vs. 0.3 exp.
AU: Company op. profits, q/q, %, Q2: 6.9 vs. 2.0 exp.
CH: Caxin services PMI, Aug: 52.1 vs. 51.7 prev.
JP: Nikkei services PMI, Aug: 49.6 vs. 50.4 prev.
EZ: Markit services PMI, Aug F: 52.8 vs. 53.1 exp.
UK: Markit services PMI, Aug: 52.9 vs. 50.0 exp.
EZ: Retail sales, m/m, %, Jul: 1.1 vs. 0.5 exp.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Amcor (AMC: ASX) Recovery hits resistance
Global packaging manufacturer, Amcor took a share market hit back in June when it wrote off the value of its long standing Venezuelan operation due to the increasingly dysfunctional business environment there. That turned out to be a buying opportunity. The Venezuelan operation is a relatively minor part of the business and Amcor went on to produce a solid F16 result.
However, the stock now faces a test from a chart point of view. The recovery sees it running up under potential trend line resistance and this has acted as a point of control on a number of occasions over the past year.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC
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