Happy Budget wash-up day – here’s what you need to know.
– Data in the US overnight was both really strong but also disappointing at the same time. The NFIB small business index rose to 95.2 which is the highest level since October 2007 when no one knew that the GFC had started. Retail sales, however, rose by just 0.1% in April, well short of the 0.4% the market was expecting, but March was revised higher.
– But in this world of mixed data is data which supports interest rates low for a long time, even if the Fed keeps tapering, so both the Dow and S&P made new intraday all-time highs. The Dow briefly touched 16,736 before pulling back to 16,715 for a rise of 0.12% while the S&P breached 1900, running up to 1902 before pulling back to close largely unchanged at 1,897. The Nasdaq fell 0.33% to 4,130.
– In Europe, the data didn’t help the euro with the ZEW economic sentiment survey in both Germany and the EU zone undershooting expectations. As is the way with this market, that means the ECB’s QE is more likely to come down the pipe – a fact supported by Bundesbank comments to this effect – so stocks rose.
– At the close, the FTSE was up 0.31% to 6,873, its highest level for more than a decade. The DAX rose 0.53% to 9,754 and in Paris, the CAC was 0.25% higher at 4,505. In Milan, stocks fell 1.11% while in Spain, stocks rose 0.19%.
– On Australian markets overnight, there was little move at all as a result of the budget, which suggests the market doesn’t believe the forecasts, especially the unemployment forecast and the implications for RBA rates. SPI 200 futures are up 5 points to 5489 bid while bonds appear to have gained a little in the 10’s.
– In Asia yesterday, Chinese data was a little weaker with industrial production, retail sales and urban investment all just missing expectations, which meant that Shanghai didn’t join the rally. The Nikkei was up 1.95%, the Sensex in Mumbai up 1.36% and the overall Asia Dow up 0.91% to 3,143. On the data front, only machine tool orders are to be released in Japan.
– On Currency markets, the big news is the Bundesbank comments about easing and the subsequent euro fall below 1.37. It sits at 1.3702 at the moment. The pound also pulled back and sits at 1.6823 this morning while the Aussie rallied as the bulls squeezed the bears before coming back to be roughly unchanged at 0.9354.
– On Commodity markets, Nymex rose 1.35% to $101.95, Gold dropped a little to $1,293 oz and Copper pulled back from recent highs to $3.13 lb. Corn rose 1.16%, Wheat fell 0.78% and Soybeans rose 1.25%.
On the data front today, there is nothing to be released in Australia but the big number is the German CPI tonight and UK employment numbers along with the BOE inflation report. In the US, PPI will be watched closely.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
The market is expecting good news from CSR’s profit report today, driven by an improving housing market and the fruits of reconstruction in its glass business.
The stock price has been displaying signs of nervousness leading into this result. It recently snuck below the steep trend line that has defined the rally since January. Over the past few days the price has clung nervously to the 40-day moving average support just below.
If this stock does disappoint the market in the near future there’s a lot of ugly looking white paper waiting to be filled between here and the longer term trend line and 200-day moving average.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC
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