Welcome to Wednesday. We’re here to help.
– Wall Street came under a little pressure last night. Not from stronger data, as has been the case often lately but in fact the opposite, with consumer confidence printing 86 against the 92.5 expected while the Chicago PMI fell from 64.3 last to 60.5 in September.
– Rationally such data should have helped stocks if the recent paradigm had held. But to the extent that good economic news is bad news and weak news is bad news for stocks, we may be seeing the emergence – or more correctly, confirmation – of growing discomfort with current levels and the fact it has been so long since a 5% or 10% pullback.
– At the close, and after a sawtooth day, the Dow finished off 28 points for a fall of 0.17% to 17,043. The Nasdaq dropped 0.29% to 4,493 while the S&P 500 fell the same amount for a loss of 6 points to 1,972.
– In Europe, the data was abysmal with German unemployment unexpectedly (at least based on the markets forecasts) rising 13,000. There is enough economic weakness in Europe at the moment without Germany slipping into the mire. Euro is lower as a result and stocks rose on the hope of ECB quantitative easing. The DAX was up 0.54% to 9,474, the CAC rose 1.33% and stocks in Milan were up 1.78% and 1.31% respectively.
– In the UK, Q2 GDP printed 3.2% as expected, which shows the big gap between having your own central bank and currency and being stuck in a one-size-fits-all straightjacket of the euro and the ECB. Stocks, however, fell 0.36%.
– In Australia yesterday, it looked like a little end-of-quarter machinations helped the market higher and the physical finished up 0.5% to 5,292.8. Feeding the end-of-quarter window-dressing theory is the fact that the December SPI 200 futures last night dropped an amazing 33 points to 5249. That’s much uglier than I expected given everything I have written above, so we’ll be watching the market closely today to see where it heads. It has, however, broken a big level and is heading lower.
– In Asia, it is the start of Chinese Golden Week today so there are holidays in China and Hong Kong but that does not mean that things will be quiet. Chinese official manufacturing PMI is out and given it’s a holiday, more people will be on the streets in Hong Kong. Markets across the region will remain focused on what happens there and how Beijing handles the demonstrations. The Nikkei is open and after a fall 0f 0.87% to 16,174, it will likely be pressured again today.
– On Bond markets, the sawtooth pattern and negative correlation of stocks and bonds continues – at least in the periphery. 10-year bonds in Milan and Madrid both dropped 6 points to 2.35% and 2.17% respectively. US 10s were up a point to 2.49%, German bunds rallied 2 points down to 0.9% and in the UK, 10s dipped the same amount, rallying 2 points to 2.43%.
– On Currency markets, the US dollar remains firm but the Aussie is doing well – in a relative sense anyway. After making a low of 0.8684 Monday afternoon, the Aussie’s rally continued and in many ways strengthened with a retest of 87 cents yesterday morning before rallying back to 0.8745 this morning. Elsewhere, the euro remains pressured at 1.2628, USDJPY is up at 109.59 and sterling sits at 1.6212.
– On Commodities, December iron ore futures rallied 44 cents a tonne to $77.47 while Newcastle coal for the same month was up 10 cents to $65.40 a tonne. But the big story of the night is the crash in Nymex crude, which fell $3.40 to $91.35 a barrel. That is a terrible technical move after recent gains and a dip below $90 could be near. Copper fell to $3.01 a pound and gold remains unloved at $1,209 and ounce. Silver is under $17 at $16.96 down 3.47% as the heavy selling continues. On the Ags, wheat fell 1%, corn lost 1.6% and soybeans were 1.32% lower.
On the data front, it is PMI day both here in Australia with the release of the AiG PMI as well as Chinese and then European and US manufacturing PMIs. Retail trade in Australia is super important as well to see how consumers are travelling.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Bank shares might be a focus today. Futures are suggesting another grim day for the ASX 200 index and they could easily be right.
But we saw quite a strong day for bank shares yesterday. The buying in CBA came off the support I noted in Monday’s article. The Nab chart is also interestingly placed. Price flicked through the support of a potential triangle formation but it’s not unusual for the 5th test of a triangle to make a small false start.
We are at one of those points that MIGHT turn out to be support for banks. The next couple of days will tell. If bank bargain hunters do return the index may not have such a bad day.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC