Good morning. Things are warming up.
– An interesting night with the big fall in crude oil in Europe, the US and around the world hitting energy stocks hard. Indeed, Exxon-Mobil’s fall has kicked Microsoft into second place in terms of market cap on the S&P 500. With 30 minutes before the close, the Dow is up 0.15% to 17,639, the Nasdaq is flat at 4,675 and the S&P 500 is down 3 points to 2,035. If momentum continues to slow don’t be surprised if a couple of small down days follow.
– Things were a little more ebullient in Europe, but not by much. The FTSE rose 0.36% which was pretty good given the stocks that went ex-dividend and economic pressure in the UK at the moment. On the continent, the CAC rose 0.19 in Paris, the DAX in Frankfurt was up 0.41% at 9,249. Stocks in Milan and Madrid were up 0.43% and down 0.17% respectively.
– Locally, after another down day on the ASX – the fourth in a row – Dec SPI 200 futures were up 4 points to 5,451. With no fresh news from the US overnight, no data today, a holiday in Brisbane, a heatwave in Sydney and a reasonable day in Melbourne, traders might clock off a little early.
– In Asia, Shanghai dipped back a little to 2,486 down 0.34% but stocks in Hong Kong rose by the same percentage, taking the Hang Seng to an almost 2-month high of $24,020. But in Japan the Nikkei was up nearly 200 points or 1.14% to 17,393, another post-2007 high as talk of a snap election grows.
– On the data front yesterday, the prospect of lower growth loomed large as the data printed on the weaker side of expectations. The NAB reports that “the annual rates for industrial production (7.7% vs 8.0% expected), retail sales (11.5% vs 11.6% expected) and fixed investment (15.9% vs 16.0% expected) all came in slightly below expectations in October, and it has raised the prospect that the 2015 GDP growth target may be below 7.5%.”
– On global bond market, US 10s dipped 2 points to 2.35%, German Bunds closed at 7.6% and UK Gilts were at 2.19%. Of more interest is the junk bond rating S&P has just given Twitter and Alibaba’s inaugural US debt issue of $8 billion.
– The US dollar lost some ground against the euro (1.2483) after New York Fed President Bill Dudley said that increasing rates too soon is a bigger risk than acting too late. Sterling continued to get hammered (1.5713) after BoE governor Mark Carney signaled rates weren’t rising any time soon and the rate of growth in housing cooled. The yen is becalmed (115.69), which isn’t surprising after such a strong run recently and the Aussie recovered most of the losses that followed comments from RBA assistant governor Kent that intervention wasn’t ruled out. The Aussie is at 0.8721 – RBA, the market is laughing at you.
– Nymex crude tanked last night dropping almost 2.5% to $74.42 a barrel, its lowest level since September 2010, after rumours of an OPEC supply cut were quashed. Gold remained around even at $1,158 even though the World Gold Council said that demand had fallen to the lowest level in almost 5 years. Copper has fallen below $3 a pound and closed at $2.986 while on the bulks the Dec iron ore contract fell 2 cents to $75.23 a tonne while Newcastle coal rose 40 cents a tonne for Dec, closing at $64.10. On the Ags, it was corn’s turn with a rise of 2.38%. Wheat wasn’t far behind, up 1.93% and soybean meal dipped 0.38%.
It’s quiet for data releases today in Australia and Asia (still waiting on Chinese new loans) but there is some huge data in Europe tonight with the release of German, French, Italian, Portugeuse and EU wide GDP. EU CPI is also out. In the US, retail sales are going to be an important gauge of how things are going economically there too.
And now from CMC Markets’ Michael McCarthy is today’s Stock of the Day
At Ramsay Health Care’s AGM yesterday the management team added more flesh to the bones of its international strategy, outlining a term sheet for a joint venture in China. On top of its market dominance in France, and an existing presence in Asia, Ramsay is looking like a rare animal – an Australian company that successfully establishes overseas operations.
However, the chart is a little more ambiguous. A double top formation is unfolding. If RHC trades up through 53.44, the formation is broken, and from a technical viewpoint should trade higher. The concern is that the further good news this week has not propelled RHC through the key level. Investors may consider protection strategies, or selling at current prices with a view to buying back in around the $48 mark.
Michael McCarthy, chief market strategist, CMC Markets
You can follow Michael on Twitter @MMcCarthy_CMC