Welcome to an interesting week ahead. Here’s your Monday prep.
– Two things occur to me that make this selloff in markets, which continued on Friday night in the US, worrying. They are in equal measure the stories that say don’t worry about this selloff and the stories that say this pullback is necessary. Both angles smack of complacency which just might help feed the psychology of a big fall as we discussed Friday.
– As it stands this morning, the SPI 200 June contract fell 14 points on Friday night suggesting a weaker open again today on the local stock market after stocks in the US fell again Friday.
– “It’s the rotation stupid” seems to be the meme that many are using to shrug this weakness off as the leaders of the rally are sold, with Craig James of CommSec noting this morning that “investors continued to take profits on previously high-performing technology, biotechnology and pharmaceutical stocks.” Equally though, JP Morgans poor earnings were a signal that other US stocks still have their issues and this earnings season is crucial in being solid to help hold the market up.
– In the end, the Dow fell 143 points or 0.89% to 16,027, the Nasdaq lost 1.33% to 4000 and the S&P 500 fell another 17 points for a loss of 0.93% to 1,816, with traders eyeing the 1800 level cautiously.
– Data in the US wasn’t too bad, which actually could be the issue given that producer prices rose by 0.5% in March against expectations of a rise of just 0.1% – the biggest lift in 9 months and music to the ears of a Fed worried about deflation. Consumer sentiment was also at a 9-month high of 82.6 in April. No signs of tapering the taper there.
– Europe also had a bad day’s trade Friday with the FTSE down 1.20% to 6,562, the DAX dropping 1.48% to 9,315 and the CAC falling 1.08% to 4,366. In Milan and Madrid, stocks fell 1.08% and 1.27% respectively.
– Speaking of Europe, Ukraine is hotting up again with separatists active in the Eastern region, seizing buildings. Traders will be keeping an eye on things, especially after Russian President Putin’s beligerent speech about Ukrainian gas debts on Friday night.
– All of which suggests another day of selling on Asian stock markets again today after what was a poor day Friday with the Nikkei down 2.38% assailed by fears of a rerun of the economic collapse that followed the last tax hike back in the late 90’s and a yen which strengthened once again. At the close, it was off 340 points or 2.38% to 13,960. The Hang Seng was 0.79% lower at 23,004 and in Shanghai, stocks fell a more modest 0.15% as the Chinese exchange continues to march to the beat of its own drum. There is no material data flow in the big Asian markets today, although Chinese FDI and new loans will be released.
– On Forex markets, the risk-off feeling is driving the yen higher and has taken the gloss off the Aussie dollar a little. The yen has opened this morning at 101.60ish with traders eyeing support under 101.50 as a trigger for more selling and no doubt another Nikkei fall. For the Aussie, it is holding in very well – all things considered – at 0.9382 and while the momentum may be fading, there is no wholesale sellers on the horizon at the moment. Euro pulled back as Bundesbank President Weidman was reported to be in favour of ECB QE on Friday night, but it is also still strong at 1.3838 this morning. The pound sits at 1.6716.
– On commodities, Nymex crude is strong at $103.33 and a clear handbrake on global growth. Gold hasn’t moved much and sits at $1,318 oz while Copper is at $3.07 lb. The Ags were all lower, with Corn falling 0.55%, Wheat down 0.3% and Soybeans off 1.3%.
On the data front, it is a quiet day in Australia with nothing of note to be released before Italian CPI and EU industrial production tonight. The big data release tonight is US retail sales for March.
Here is CMC Market’s Stock to Watch from senior market analyst Ric Spooner
JB Hi Fi
A couple of big green candles and some gapping action have put JB Hi Fi on my traders’ watch list.
On Friday, JBH opened lower and moved down to fill the gap it created with Thursday’s opening. It then staged an impressive intraday rally to finish up a cent on a day in which the index fell 0.95%.
This all followed a strong gapping move above the 200 day moving average on Wednesday.