It has been a terrible night for stocks and the ASX SPI 200 futures suggest the Australian stock market will open down near 4,900 after closing at 4,987 yesterday.
You can blame that on both the renewed weakness in crude oil, which could not hold yesterday’s Asia bounce, and the acute weakness in US stocks which have been selling almost all day since the open. The Dow and S&P are down around 2% while the Nasdaq has lost around 3%.
On oil markets, Brent crude traded below $30 a barrel briefly making another 11-year low. Nymex crude gave back some of its gains made yesterday as it pulled back as well.
The Aussie dollar has been the biggest loser on currency markets and it is back below 70 cents at 0.6966 this morning. That’s only down 0.23% on the day (the Canadian dollar is in contrast down 0.57%, dragged lower by oil) but the Aussie had traded as high as 0.7048 on the back of the better than expected Chinese trade data yesterday.
With all the weakness again in markets, bonds are big and gold has rallied $11 from yesterday’s lows and sits at $1,093. Iron ore is down again and copper gave back yesterday’s gains as well and is sitting back at $1.95 a pound.
So, the scoreboard (8am):
- Dow: 16,151, -365 (-2.21%)
- S&P 500: 1,890, -48 (-2.57%)
- SPI200 Futures (March): 4844, -93 (-1.9%)
- AUDUSD: 0.6964, -0.0019 (-0.26%)
And now the top stories:
1. Australia’s ridiculously volatile jobs data is out today. With everything going on in the world at the moment this might seem a strange one to kick off with. But no one believes the monthly jobs data is real and even the ABS says there are statistical quirks driving the data. Yet the jobs data is the most important economic release we get in Australia each month for traders.
So at 11.30 this morning traders will be on tenterhooks. The NAB says we’ll get a 25,000 fall after last month’s huge increase of more than 70,000 jobs. Westpac is expecting a 17,000 fall. The market is looking for a fall of just 12,500 and unemployment of 5.9%.
2. Crude oil is down again and it’s hurting stocks. There wasn’t exactly a panic in markets when oil went under $30 yesterday morning, so the trader in me says that there is little chance of a sharp recovery. That means any rally in oil is going to struggle and have to build momentum. But after a better day in Asia yesterday, oil has reversed again overnight. That reversal hurt sentiment on stocks overnight as lower oil challenges analyst earnings estimates for the big indexes as a whole.
Chris Weston IG’s chief market strategist Chris Weston told me that the issue is “concerns about consensus 7.2% drop in Q4 earnings” (after -1.7% in Q2, -3.1% in Q4) makes it the worst since the third quarter of 2009.
You probably don’t need to see this but here is Myles Udland with 5 charts that definitively prove oil is toast. That’s almost enough for me to go uber-contrarian and buy crude oil.
3. Uber bear Albert Edwards says stocks could fall 75%. There are bears, there are uber-bears and then there is Albert Edwards. BI UK’s Ben Moshinsky went along to Edwards’ latest presentation and it was not easy listening. Edwards reckons central banks have no ammunition to support the global economy and that the US will slip into recession taking the S&P down to 550. Yep, below the GFC low of 666. Moshinsky has more here.
4. The Fed’s Beige Book hardly supports aggressive tightening. The Fed’s Beige Book is a summary of economic activity within the 12 districts covered by the regional Fed banks. An overall view of the economy is then overlaid taking this into account.
So it’s a great summary of what is going on. But in the latest Beige Book, released this morning, what sticks out is a lack of inflation, the impact of a strong US dollar on economic activity and the persistence of weak global demand. It’s hardly an outlook that suggests the Fed will deliver 4 tightenings this year. And it’s not one that will support stocks.
5. China has stabilised its currency but not capital flight from the country. Andrew Roberts, the “sell everything guy” has a great chart in his latest note showing the extent of capital flight from China. $170 billion left the country in December alone. Roberts called the chart the “most important chart in the world now”. BI UK’s Jim Edwards has more here.
ICYMI here is the latest from Roberts:
- HERE IT IS: The ‘sell everything’ note the whole financial world is talking about
- Here’s why the guy who just said ‘sell everything’ thinks the game in China is up
- RBS has an ominous warning for anyone who thinks it’s time to buy stocks, AND
- The Kouk wants a $10,000 bet with the ‘sell everything’ analyst that he’s wrong
6. Demand for Beer Bonds is frothy.Emerging market debt might be on the nose, but the monster bond offering from global beer giant Anheuser-Busch InBev shows demand for quality debt remains strong. The FT reports that the initial debt offering of $25 billion was swamped by $110 billion in demand from investors. As a result the company has upsized the issue to a monster $46 billion.
The FT says that bond issues by Ford and Walt Disney last week were also oversubscribed.
With cash rates at zero in many jurisdictions and government bond rates low when you “sell everything” high-grade corporate bonds can look very attractive.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
The Blackmores chart is going to be fascinating litmus test for overall market sentiment over coming days.
The stock finished well above its low yesterday but it’s getting close to the 50 day moving average at $190. Apart from a couple of minor blips below this average, it has defined the whole, spectacular uptrend in Blackmores. This kicked off below $35 about a year ago and recently had a Santa Rally high of $220.60.
This 50-day moving average could easily become support again, even if there is another blip below it. A clear break of the 5- day average might bring chart support and the 38.2% Fibonacci retracement into play. These form a zone of potential support between about $155 and $167.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC
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