Welcome back, Friday.
– I don’t want to be cynical but if we really are in the paradigm – again – where bad news is good news, then this market is scarier than even I thought it might be. Addicted to low rates and free money, it seems stock traders are simply going to ignore the chances of a Fed end to QE in just two months’ time. That’s not to say I don’t respect the market in front of me, because as a trader who uses technicals as part of my toolkit, this move – whether in FX, stocks or rates – makes sense on a technical basis. Fundamentally, however, it’s another story. Take the euro for example. Last night we had clear evidence of what a moribund economic zone this is with German Q2 GDP falling 0.2% in Q2, France flatlined and overall EU growth was non-existent. Yet euro is still in the mid 1.33 region. The question for traders is why aren’t people selling?
– Time will tell, but if the Fed does deliver on its promise to end QE in October and if rates then start to rise in the next six months, markets could get a huge wake-up call. Looking overnight however, we see that the rise in jobless claims – which really just reversed recent lower numbers – saw traders question the jobs recovery helping stocks rise.
– At the close, the Dow was 62 point higher at 16,714 for a gain of 0.37%, the nasdaq was up 0.43% to 4,453 and the S&P 500 rose 8 points or 0.43% to 1,955.
– In Europe, the DAX managed to rally even with the weak data up 0.28% to 9,225, the CAC celebrated no growth in France during Q2 by rising 0.24% to 4,205 while stocks in Milan and Madrid fell 0.29% and 0.09% respectively. The FTSE 100 in London was up 0.43% to 6,685.
– In Asia yesterday, stocks in Shanghai fell 17 points or 0.76% and perilously close to a break back below 2200, finishing at 2,206. The weakness seems to be placed at the feet of the weaker-than-expected economic data the day before but equally we are seeing a continuation of the strong technical reversal of recent 12-month highs. The Nikkei was up 0.67% on a combination of better global stock atmospherics and a weaker yen.
– Locally, all of the above has combined to push SPI 200 futures for September delivery up 23 points to 5517 as it heads toward recent highs.
– On Bond markets, US 10-year Treasuries fell 3 points to 2.4%, Gilts were unchanged at 2.44% and German 10s are threatening a break of 1%, closing at 1.02% overnight.
– On Currency markets, the euro is stronger than it should be at 1.3366, sterling has found support at the bottom of the recent range 1.6686 and USDJPY is at 102.45. The Aussie was a little higher, rising more than 30 points off the low of yesterday at 0.9317 this morning.
– On Commodities, September Iron Ore fell 37 cents to $92.88 a tonne while Newcastle Coal fell 70 cents to $70.25 a tonne.
– Nymex Crude absolutely tanked, falling $2.09 to $95.50 a Bbl, Gold is still marching on the spot at $1,311 and Silver is at $19.87 an ounce. Copper fell again, down 2 cents to $3.09 a pound while Soybeans dipped 3.16%. Corn and Wheat had better nights, up 1.12% and 1.75% respectively.
On the data front, it is going to be a quiet afternoon with the Feast of the Assumption celebrated in Germany, France, Spain and Portugal but in the UK we get Q2 GDP, which is super important. There is nothing of note in Australia or Asia save for Hong Kong GDP.
Tonight in the US, we get the release of the New York Empire manufacturing index, PPI, TIC (foreign investment) flows, industrial production and capacity utilization data.
And now from CMC Markets’ Michael McCarthy is today’s Stock of the Day
Mineral Resources’ Strategic Takeover Loss
Mineral Services reported full year numbers yesterday – and the reaction was explosive. The trading range was $1.36, or 13.5% of the closing price. In one session. This kind of behavioural change in a share price can flag significant moves to come.
The shares finished down almost 6%, despite reporting a 38% lift in underlying NPAT, and a return on equity of 27%. The market appeared to focus on an $18 million write-off relating to its “failed” tilt at Aquila Resources, where it was trumped by Baosteel. Mineral Services still managed a headline NPAT of $231 million.
The result is all the more impressive when investors remember this is a mining services company. Although it didn’t succeed with its rather cheeky tilt at the miner (a good fit with its processing businesses), it’s very likely that through the inter-company discussions it deepened relationships with an important future customer. There’s a real possibility that the market will change its mind on this one.
Michael McCarthy, chief market strategist, CMC Markets
You can follow Michael on Twitter @MMcCarthy_CMC
Business Insider Emails & Alerts
Site highlights each day to your inbox.