– “Buy the dip” is not dead. Stocks ended on a much firmer footing Friday after a volatile week’s trade which saw the Dow trading through an 800-point range.
– At the close, it seems soothing words from Fed Chair Janet Yellen about US growth, combined with comments from noted hawk James Bullard, about the potential for quantitative easing’s end to be delayed, and Bank of England chief economist Andrew Haldane’s suggestion that rates will be lower for longer in the UK was the antidote to the acute pessimism that gripped traders mid-week.
– At the close the Dow rallied 263 points to 16,380, but it was still down 0.99% on the week. The Nasdaq rallied 0.96% on Friday and the S&P 500 leapt 1.30 to 1887. Like the Dow though this left the S&P 500 still 1% lower on the week.
– In Europe, even with a huge rally Friday, only the DAX finished the week in the black after stocks in Germany surged 3.11% on Friday taking the DAX to 8,850. The FTSE rallied 1.84% to 6,310 and the CAC belted 2.92% higher to 4,033. Stocks in Milan and Madrid rose 3.42% and 2,97% respectively.
– The local impact was that ASX futures traders pushed the Aussie market sharply higher and it should be a very good open this morning. The SPI 200 December contract rallied 68 points to 5,305.
– Asian stocks were mixed on Friday with Shanghai down 0.66% to 2,341 after the miss in the MNI business sentiment survey which printed 51.7 against 52.2. Japanese stocks fell 1.39% to 14,533 but the Yen’s weaker open this week might help a little in Tokyo today and no doubt the US moves will dominate.
– With stocks surging higher, bond yields rose in the US, Germany and UK where the 10’s were higher. US 10’s finished at 2.20%, German Bunds were 0.82% and Gilts finished at 2.19%. That is still super low rates and reflects that a couple of days rally has not cured what ails markets – increased uncertainty.
– On currency markets the Aussie dollar is building a very interesting technical pattern suggesting a big move coming. It sits at 0.8746 this morning. USDJPY is back up near 107 at 106.89, GBP is at 1.6088 and the Euro is sitting at 1.2758.
– On commodity markets iron ore was higher with December 62% Fe futures up 42 cents to $80 neat a tonne. Newcastle coal is struggling, however, with the December contract down 15 cents to $64 a tonne.
– Elsewhere on commodity markets crude rallied 26 cents a barrel to $82.96, copper closed at $3 a pound, gold at $1,238 and silver fell 1% to $17.26 an ounce. On the Ags wheat fell 0.19%, corn was 1.14% lower with soybeans falling 1.23%.
– On the data front today, it is fairly quiet with no data in Australia but RBA Assistant Governor Kent is talking at 10.30am. Tonight the German PPI will be interesting, but that’s about it.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
This might be one for the text books. Iress shares had a big bounce off their low last Tuesday. If this low holds it will represent the classic 3 part correction – 2 swings lower with a correction in between where the 2nd swing down is the same size as the first (X/a = b/c).
For good measure the low at “c” rejected the top of the gap formed after Iress released its latest profit result. If the text book script remains in place we would now see a rally that will take us above the high at X ($10.48)
If you are not familiar with Iress, it’s a diversified financial markets software and wealth management group that has expanded overseas including into the UK where it now has significant operations.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC