Welcome to your Tuesday morning market update:
– Yesterday in Asia markets were a little better bid already because the referendum made clear the path Crimea was on and markets abhor uncertainty. But overnight risk was back on, stocks are higher and the US dollar is weaker after markets seem to be laughing at what they view as weak sanctions on 11 Russian individuals as a result of the Crimean referendum – especially the fact that Russian President Putin escaped being added to the list.
– Traders will be wondering what next and some will be worried that there is more to come. But unless or until the next shoe drops, it seems risk is back on.
– Which means that local shares will be higher at the open this morning, with the SPI 200 March contract up 29 points in overnight trade to 5350 bid on the back of the offshore moves.
– Likewise, the Aussie dollar is higher at 0.9084 on both the risk-on meme and Westpac chief economist Bill Evans’ change of interest rate call from another rate cut later this year to a period of stability before rate rises in the second half of 2015. The Aussie sits at 0.9085 this morning.
– Turning overseas, US stocks bounce from the open and have traded a fairly tight range since then. At the close, the Dow is up 176 points or 1.10%, the Nasdaq is up 0.86% and the S&P 500 has regained a fair chunk of Friday’s loss, up 18 points to 1859 for a gain of 0.97%.
– Helping the tone was the jump in industrial production which rose 0.6% versus the 0.1% expected, but the NAHB home builders index printed 47 versus 50 expected, but it was still higher than the 46 we saw last month.
– In Europe, markets were focused on the lack of conflagration following the Crimean referendum and marched higher. The FTSE rose 0.61%, while on the continent, stocks rose more in a two-step process at the European open and then again when US markets opened. The DAX rose 1.38%, the CAC was 1.32% higher while in Madrid and Milan stocks rose 1.66% and 2.52% respectively.
– On currency markets, the euro rallied again up above 1.39, even though inflation has dropped to 0.7% in the EU against expectations of 0.8%. Of course, traders in usual circumstances might be worried about deflation in the EU. But for the moment it is weakness in the US dollar that is driving markets.
– GBP sits at 1.6635, USDJPY rallied to 101.73 while the Aussie, as noted above, is higher this morning also. On the crosses, AUDJPY rallied sharply to be at 92.42, AUDEUR is up to 0.6527 while the Aussie also rose against the Kiwi to 1.0606.
– On Commodities, it was an ugly day for Gold as fear washed away. After making an early high around $1390 oz, Gold is sitting at $1366 this morning. Nymex crude is off 0.86% to $98.04 and Copper has slipped back a cent to under $3 again at $2.99 lb. On the Ags the volatility continues with Corn down 1.7%, Wheat off 1.86% and Soybeans up 0.23%.
On the data front, the RBA minutes will be pored over this morning for clues on the dollar and interest rates. European trade and the ZEW business surveys for Germany and the EU will also be important. In the US, the CPI data is very important also for the Fed and policy, with this week’s meeting of the FOMC and a very low number might, at the margin, impact the size of the taper. Also of interest to traders, after the mysterious $100 million change in Fed custody holding last week.
Now here is Ric Spooner’s Stock to Watch today.
A quick look at this chart suggests that the “long suffering” label could fairly be applied to shareholders in gold stock Kingsgate Consolidated.
However, the stock’s recent rally, interest in gold due to Ukraine and Kingsgate’s release of a feasibility study for a new project in Chile have combined to put this stock on the traders’ radar.
For the bulls, a clear break above the long established trend channel resistance and 200 day moving average would be an encouraging development. On the other hand, another capitulation at the channel resistance followed by a break under the black trend line might be a sign of ongoing weakness.
Ric Spooner, chief market analyst CMC Markets – @ricspooner_CMC