Your morning market update features a big mystery move.
– A better night last night on global markets, as has become usual for Tuesdays, which seem universally positive lately. This has left US markets higher after a choppy night’s trade, leaving the June SPI 200 contract 20 points higher in overnight futures trade.
– But the big question for traders will be what, or who, caused this ramp in the last hour of trade that took the market higher for the three big major US stocks indices?
– Certainly it wasn’t the strong result in US retail sales which beat expectations, printing a 1.1% rise in March against the 0.08% expected, because they were released much earlier in the day.
– So traders will be scratching their heads but the print is the print and on the day, the Dow rose 146 points or 0.91% to 16,173. The Nasdaq rose 0.58% to 4,023 and the S&P 500 rose 15 points or 0.84% to 1,831.
– In Europe, the FTSE was up 0.34% to 6,584 as miners took the lead on Ukraine tensions, the DAX was up 0.25% to 9,339 and the CAC rose 0.44% to 4,385. In Milan and Madrid, stocks went in opposite directions with Italian shares up 0.55%. Traders on the IBEX exchange took Spanish stocks down 0.17%.
– In Asian trade yesterday, things were fairly quiet given what might have happened after the weak US lead from last week, with the Nikkei only losing 0.36% in a choppy day’s trade led by the USDJPY rate and its ability to hold again at recent range lows. In Shanghai, traders left stocks up just 0.07% after a fairly subdued day’s trading range, while in Hong Kong, stocks rose 0.15%. Traders are likely to take Asia higher this morning and then focus on Chinese GDP which is due out tomorrow toward the end of the day.
– On currency markets, the better tone helped the Aussie dollar back above 94 cents to 0.9413 this morning. It is up on the crosses as well with USDJPY bouncing off support below 101.50 to sit at 101.83 this morning. The Aussie is also up against the euro after more ECB governor comments about the operation of quantitative easing in Europe suggest the market is being softened up for a change in policy. This morning, euro is at 1.3821, stronger than might be expected – possibly after industrial production beat expectations in the EU with a 1.7% print in February. The pound is at 1.6729.
– On commodity markets, Gold is up on yesterday’s open but did very little overnight and it sits at $1,325.70. Nymex Crude is still relatively high at $103.51 while Dr Copper is unchanged at $3.07 lb. The Ags were all higher, with Corn and Soybeans both up around 0.90%. Wheat rose 2.8%.
On the data front today, the market is still waiting on some semi-important Chinese data on foreign investment and new loans but locally all eyes will be on the RBA minutes from this month’s board meeting which will be released at 11.30am AET. Key will be the discussion on the Aussie dollar.
Tonight we get UK CPI, which is very important before the German and Eurowide ZEW economic surveys. Then the big one for the night in the US, which is CPI for March. The market is looking for a lift to 1.5% year-on-year from 1.1% and a month-on-month result of just 0.1%. This data is key for thoughts on the Fed and, by implication, the US dollar.
Here is CMC Markets’ Stock to Watch from chief market strategist Michael McCarthy
The current sell off in previously popular stocks is indiscriminate – a high P/E ratio is enough to put a share price in sellers’ sights. Any investors concerned that their portfolio is too concentrated in high dividend yielding stocks could be looking at the current weakness to buy growth exposures – and Carsales.com should be on the list.
Carsales.com hit an all-time high on March 7 – just 5 weeks ago. Yesterday, it closed down more than 20% from that high point. As the chart below shows, it’s entering an important support zone between $9.50 and $10.10.
Some analysts argue that the P/E, at around 25 times, is still too high. However, this estimate doesn’t include earnings from recent acquisitions such as a 49% stake in South Korea’s Encarsales. Additionally, high growth expectations can justify higher P/Es – and with consensus LTG forecasts for Carsales.com around 18%, it’s a stock to watch.