Well played Germany.
– So, it’s back to the normal “nothing can hurt this market” meme as the concerns over Portugal and Banco Espirito abated Friday.
– This lifted a weight off the bulls and US stocks closed higher and well off the early day’s lows. This was despite the Wells Fargo earnings which on the face of it were okay but reported mortgage revenue was down. This put pressure on its shares, which closed down 0.6%. At the close of play, the Dow was up 29 points to 16,944 for a gain of 0.17%. The Nasdaq was up 0.43% to 4,415 and the S&P rose 3 points to 1,968.
– In Europe, the German CPI printed in line with expectations at +3% for June to keep the yearly rate at 1%. At the close, the DAX rose 0.07% to 9,666, the CAC was 0.37% higher at 4,317 while in London, stocks rose 18 points to 6,690 for a gain of 0.26%. Stocks in Milan were 0.62% higher while in Madrid, stocks had a bad mid-part of the day, closing up just 0.05%.
– Locally on the ASX, the SPI 200 September futures rose 12 points to 5465. It should be a good day today given Iron Ore has finally broken higher, taking out resistance at $97 tonne.
– In Asia, the Nikkei fell 0.34% on Friday after the Portugal concerns on Thursday from the US and Europe. This took the Nikkei to 15,164 for a 1.8% loss on the week. The Hang Seng closed down just 0.03% while in Shanghai, Reuters reports it was “gains for auto stocks on improved first-half car sales and belief that a government policy promoting ‘green’ vehicles will help in the second half” which drove stocks to close up 0.42% at 2,047. Singapore GDP is the only mini-major release in the region today besides Chinese loans and FX reserves.
– On Bond markets, concerns over Portugal evaporated to give Italian and Spanish bonds a chance to rally. Italian 10s fell 4 points to 2.79% while Spanish bonds dropped 3 points to 2.78%. German 10-year Bunds closed down 1 point to 1.21% while UK 10s rallied with the periphery down 3 points to 2.6%. In the US, 10-year Treasuries closed at 2.52%.
– Locally on the SFE, 3-year bonds lost a point to 97.43 (2.57%) while the 10-year bonds were off 2 points to 96.56 (3.44%)
– On Currency markets, it was a day of quiet two-way trade in the majors, with the Aussie closing at 0.9391. Euro settled at 1.3607 on Saturday morning while sterling and USDJPY finished at 1.7122 and 101.36 respectively. Tomorrow night, Janet Yellen is ultra important for any change to this near-term range trade in currencies.
– On Commodities, the huge news is that Iron Ore has broken out and is headed higher based on the technicals. It closed the week at $97.17, up 85 cents for September delivery. Newcastle Coal slipped again with September futures down another 15 cents to $69.60 a tonne.
– Elsewhere Crude, happily, slipped $2.10 to $100.49 bbl for July while Gold finished at $1,339 and Silver closed at $21.44. Worth noting on Silver is that Reuters has been appointed to host the silver fix from August. Copper closed at $3.26, Corn fell 0.19% but Soybeans and Wheat were poleaxed, losing 2.56% and 4.1% (not a typo) respectively after the supply estimates from the US DoA upgraded forecasts.
On the data front today, there is nothing of note in Australia, but Singapore releases its GDP for Q2 2014. EU industrial production is out tonight but the key is ECB president Draghi’s speech tonight.
And now from CMC Markets’ Michael McCarthy is today’s Stock of the Day
IAG – OMG
General insurance is a tough business. When claims roll in, earnings take a hit. When claims ease, premiums come under pressure. There’s very little sunshine for insurance companies between storms. However, IAG has a bit of a tan at the moment, after six months largely free of natural disasters. This may be as good as it gets for IAG.
IAG is in the news – it recently purchased Wesfarmers insurance business, and had its rating re-affirmed by S&P. The ratings agency also lifted its negative watch on two of the former Wesfarmers subsidiaries. Unfortunately for shareholders none of this was enough to propel IAG shares through long term resistance at $6.00 (weekly chart below).
The integration of the new businesses significantly increases operational risk. In trading on Friday IAG recorded a 2.2% lift to $5.98. It’s likely investors and traders are watching closely – if it once again fails at this key inflection point, selling could quickly gather momentum.
Michael McCarthy, chief market strategist, CMC Markets
You can follow Michael on Twitter @MMcCarthy_CMC