Here’s your only midweek overnight update that matters.
– An interesting night for stocks in the US with a higher open, intraday fall and then recovery. This left the Dow up 0.55% or 90 points at 16,263, the Nasdaq up 0.28% to 4,034 and the S&P 500’s recovery pushing up another 12 points to 1,843 for a gain of 0.68%. In the context of the US inflation data last night, which was slightly higher than expected and reinforced the Fed taper, this is a pretty solid result.
– Current indications based on futures trade are for a flattish open for the Australian stock market today. After rising 0.5% yesterday, it saw an 8-point gain in the June SPI 200 futures contract. This is even though miners were under pressure in the UK after commodity price falls overnight.
– But while the local market may open flat there are plenty of catalysts, or potential catalysts, for volatility. Russian President Putin seemed to be stirring the pot again overnight, saying both that he couldn’t recognise those in power in Kiev but they needed to do something or Ukraine was headed for civil war.
– Closer at hand though, the release today of Chinese GDP for Q1 is the fulcrum around which the next moves in markets will pivot. It is an especially big risk for stocks and the Aussie dollar, noting that risk has both upsides and downsides. The market is looking for a slowdown in growth year-on-year from 7.7% to 7.3% for Q1 with 1.4% actual growth in the quarter. Retail sales are also out but of secondary importance to the GDP.
– Turning then to Asian markets yesterday and the Nikkei was higher by 0.62% on the back of the recovery in USDJPY but the Hang Seng fell 1.60%. Stocks in Shanghai dropped 1.39% after credit and M2 data disappointed yesterday.
– In Europe, the tensions over Ukraine took their toll along with the price action in metals markets which took miners and thus UK shares lower. At the close, the FTSE was down 0.63% to 6,542 but on the continent things were a bit weaker after the ZEW economic sentiment surveys for Germany (43.2) and EU-wide (61.2) disappointed. Combined with Ukraine sentiment, this saw the DAX down 1.77% to 9,174 while the CAC fell 0.90% to 4,345. In Milan, stocks were hammered 2.33% lower while stocks in Madrid fell 0.83%.
– On currency markets, it was fairly boring for a change save the Aussie dollar which came under pressure after the RBA minutes were released yesterday. It’s now down about 70 points from the high at 0.9352 this morning. Euro is at 1.3812 and USDJPY at 101.84 while the pound is at 1.6724.
– Commodities were not boring with a report that Chinese demand for gold will stabilise this year, knocking the price 2% lower to $1,302 even though the very same report talked of bright demand going forward and tensions in Ukraine rising. Which of course is a bit ugly for the bulls. Copper lost 4 cents or 1.45% to $3.02 while Nymex crude sits at $103.74 this morning. On the Ags, it was volatility again with Wheat up 3.39%, Soybeans rising 1.69% and Corn quiet, up just 0.15%.
On the data front it will be all about Chinese GDP today. Besides a conflagration in Ukraine, nothing can distract from this data and while the market is worried about a weak number, the risk consequently is of a positive print catching traders on the hop.
Tonight we get EU-wide CPI which is important for the euro and expectations of an ECB cut or QE. In the US, building permits, housing starts and industrial production are out as well as a number of Fed speeches.
Here is CMC Market’s Stock to Watch for Today from Michael McCarthy, chief market strategist
Newcrest – tail wags dog
Traders are divided on trading Newcrest shares – they either love it or hate it. It’s notoriously unpredictable, and often seems to go against the moves in the underlying metal. The gold mining subsector was the only one to finish in negative territory yesterday.
One theory explaining this behaviour is that share market participants use Newcrest as a proxy for trading gold itself. This means it often reflects trader anticipation of the next move in gold, rather than the current spot gold market.
The chart illustrates this. Note how often Newcrest (green candles) pre-empts moves in gold (gold line). The chart also shows why traders may prefer trading Newcrest rather than gold – it’s much more volatile. Investors and traders looking for leads to short term moves in gold could do worse than watch this stock.