Ah, Friday. I needed that.
– Locally, the weak Aussie dollar is the story of the day after the most important 24 hours of trade in a very long time. Important not because of the rogue 121,000 employment number released by the ABS, but rather, important because it was the second time in as many days that the Aussie climbed back above 92 cents only to get hammered by the bears. That’s all you need to know – the darling of currency markets is now no more as traders exit their longs and sellers are out from under the weight of the cost of selling Aussie as a result of the interest rate spread. It’s back at 0.9102 this morning after a low of 0.9087 and while it might rally over the day and into the week’s close, the pressure remains.
– But it’s not just the Aussie dollar. Last night Italian and Spanish bonds continued their recent sell-off and the Canadian dollar lost more than 1% against the US dollar. There appears to be a de-risking of portfolios globally at the moment and investors are also clearly assessing the fall in commodity prices as being a big risk for Australia and Canada.
– Turning to overnight trade on stock markets and there was no such excitement, although US stocks started in the red and then ground their way higher over the course of the day. In the end, the Dow finished down 0.12% at 17,049 but the Nasdaq and S&P managed to drag themselves back into the black. The S&P finished up 1 point at 1,997 from a low of 1,986 and the Nasdaq was up 0.12% at 4,592.
– One thing worth noting about the US economy, markets, bonds and the US dollar is that as well as economic data supporting the notion of a recovery, so too is the size of the US budget deficit. Last night the US Treasury reported that the August shortfall was nearly $420 billion less than last year. This suggests more tax receipts which suggests the economy is doing better – people don’t pay tax unless they have to.
– In Europe, stocks didn’t see the recovery in the US and instead focused on the EU’s new Russian sanctions. There were only minor falls, however, on the continent with the DAX off 0.09% to 9,691, the CAC dipping 0.22% to 4,441 and the indices in Milan and Madrid down 0.23% and 0.47% respectively. In the UK, it looks a bit like money is being taken off the table as a precaution to a Scottish independence Yes vote and the FTSE was 0.44% lower to 6800.
– Locally, the impact has been that the September SPI 200 contract has risen 5 points to 5,552 while the December contract is down 8 points to 5,551.
– In Asia yesterday, Shanghai’s reversal of recent range highs continues as it looks like it is mapping out a trading range. The index fell 0.27% to 2,312. The Hang Seng dipped 0.17% to 24,663 but the Nikkei continues to bathe in the glow of a weaker yen, up 0.76% to 15,909. We are still waiting for new loans in China and Japanese industrial production is also due out.
– On Bond markets, US 10s rose 1 point to 2.55%, German 10s are still at 1% and UK 10-year Gikts rose a massive 13 points for a 5.33% capital loss to 2.50%. The Italian and Spanish bond selloff continues with both markets rising 5 points to 2.46% and 2.32%.
– In Currency markets, as noted above, the Aussie dollar fell heavily and remains pressured for the moment, looking for support. The euro is sitting at 1.2920, sterling is back up at 1.6252 and USDJPY is up at 107.04.
– On Commodity markets Iron Ore fell 14 cents to $83.42 a tonne for September and 60 cents for December delivery to $82.07. September Newcastle Coal lost 10 cents to $66.10 a tonne. Nymex Crude rose 1.52% to $93.06, Gold is at $1,241 and Silver is down at $18.71 an ounce. Copper slipped under $3.10 a pound while on the Ags, Wheat fell 2.16%, Corn lost 1.56% and Soybeans tanked 3.41%.
On the data front, inflation data across Europe will be interesting along with the very important US retail sales. Chinese industrial production and retail sales are out over the weekend.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
The large red candle on the chart below gives the game away. Yesterday’s profit result was a bit of a miss as far as the market was concerned.
If Sigma is not a familiar name, Amcal probably is. Sigma is a wholesale pharmaceutical provider whose brands include Amcal. Its sales growth has been a bit run down recently and could probably do with a bit of a tonic. Cuts to the Government’s Pharmaceutical Benefits Scheme have been a headwind.
However, Sigma has a strong balance sheet. It’s had an ongoing buyback program and this will continue. It will buy back shares instead of paying a dividend this half. Further capital management is a possibility if Sigma can’t find businesses to buy with its spare cash.
This potential for buy back support might put the trend line which currently intersects at around 76c on the radar for potential buyers of this stock.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC