– The big news over the weekend was that the PBOC cut rates in China by 25 bps as it tries to bolster “fundamental trends in growth, inflation and employment”. That’s important because it underpins the determination of the PBOC, and its political masters, to keep growth as strong as possible. At the same time it also emphasises the reality that growth is indeed slowing. We’ll hear more this week from the National People’s Congress.
– Also out over the weekend was the official PMI stats which showed that both the manufacturing PMI (49.9) and non-manufacturing services PMI (53.9) did better than expected. Of course, the manufacturing number is still in the contraction zone – just – which highlights the headwinds in the economy at the moment. Helping Chinese manufacturing no doubt is the weakening trend of the CNY which the NAB expects to trade up to 6.30 this month.
– Elsewhere on the data front, US Q4 GDP slipped to 2.2% in the second estimate released Friday. This is a step down from the 2.6% estimated last month but still a smidge better than the 2.1% expected. Also out was the Chicago PMI, which tanked to 45.8 from 59.4 last and 58 expected. But consumer sentiment printed 95.4, slightly better than the 94 expected. In Germany, the good news was that CPI in February rose 0.9% after last month’s oil-induced fall of 1.1%.
– Looking back to equity markets around the world, and there was a big difference between continental European bourses, which rallied strongly, and the performance in the US where stocks fell. Locally, SPI futures traders on the ASX took prices a little higher. No doubt the Chinese rate cut might help trade on the ASX today initially, but it depends if Shanghai takes prices higher again. At 3,310, Shanghai is just a little more than 3% from its recent highs for the year.
Here’s the overnight global stock market scoreboard:
- Dow Jones down 0.45%, 81 points to 18,133
- Nasdaq down 0.48%, 24 points to 4,964
- S&P down 0.27%, 6 points to 2,105
– In Asia, the talk last week of the rate cut in China helped Shanghai end the holiday-shortened week up another 0.35% to 3,310. In Japan, the market only budged 0.06% to 18,798 while in Hong Kong, stocks dipped 0.32%.
– On bond markets, the dip in the GDP and Chicago PMI took rates lower in the US, with the 10s closing at 1.99%. German 10s closed at 0.29% while 10-year Gilts in the UK finished at 1.80%.
– Currency traders took the Aussie higher after the US data took a little bit of the previous night’s US dollar mojo. This morning the Aussie dollar is back above 78 cents at 0.7817. Euro is languishing at 1.1181 however, with USDJPY at 119.73. Sterling is at 1.5434 and the Canadian dollar is at 1.2494.
– On commodity markets, there has been a most remarkable move on Newcastle coal futures. March is up $3.85 to $71.45 while the rest of the curve out to December 2018 is up $2.40 per contract or more with prices between 2018 and 2021 up $1.95 a tonne. Remarkable! Perhaps coal traders were excited by the solid 2.8% rally in Nymex Crude to $49.52. Elsewhere, gold finished at $1,213 and copper closed at $2.69 a pound. On iron ore, June dipped 45 cents a tonne to $61.55.
On the data front today we get a raft of data across the globe. opening the bating in Australia is the AiG PMI, then TD Securities monthly inflation is out along ith the HIA new home sales and Company gross operating profits. Offshore we see the release of PMI’s in Japan and China before the European versions are out tonight. Also out tonight is EU CPI, US ISM manufacturing and personal consumption data.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
The last day of the reporting season saw two pretty different retailer reports. Woolworths worried the market by noting a sluggish start to current quarter sales. Harvey Norman on the other hand reported pleasing like for like sales growth of 2.8% in the 4th quarter with momentum building in the current quarter. It’s like for like sales rose 8% in January.
However, the strong recent performance has Harvey Norman shares trading around 18 times F15 earnings and sees it approaching a key resistance area around $4.50. Firstly, this level represents a 50% retracement of the gut wrenching decline from $7.15 to $1.71. Secondly, a short term peak around this price would also complete a couple of harmonic AB=CD patterns.
These are shown on the chart below. The major one is shown in black. A peak around here would see the CD swing being the same size as the AB swing. The more recent one is shown in blue.
Here a peak would see cd being 127% of the size of the ab swing.
Ric Spooner, Chief Market Analyst CMC Markets
You can follow Ric on Twitter @ricspooner_CMC