It’s not the holidays yet. Here’s your update to keep ahead of the pack.
– Stocks have stretched their recovery to three days of rallies with strong gains in Europe and the US building on the Nikkei’s incredible 3% jump yesterday. This has left the June SPI 200 contract up 16 points in overnight trade to 5422 bid.
– Key to the US move seems to be the continued comments from Fed chair Janet Yellen that the FOMC is in no rush to raise interest rates anytime soon, perhaps even not till 2016, along with a mildly more positive Beige Book’s read on the state of the economy. But with Google tumbling after hours the tone might not be as ebullient in Asian trade today as might otherwise be the case.
– At the close, the Dow is up 162 points or 1% to 16,425, the Nasdaq rose 1.29% to 4,086 and the S&P 500 rose 19 points or 1.03% to 1,862. It’s a solid result after the mixed data which showed weaker than expected building permits and housing starts but stronger industrial production. It does highlight, though, the link between this market and free money at zero interest rates, not earnings as this great chart from Sam Ro of BI US shows.
– In Europe, it was a universally positive day, no doubt aided not only by the Nikkei’s lead and US strength but also the still low inflation outcomes for March and the year to March of just 0.5%. That suggests the ECB will soon embark on its own QE. At the close, the FTSE was 0.65% higher at 6,584, the DAX rose 1.57% to 9,318 and the CAC rose 1.4% to 4,406. In Milan, stocks roared higher up 3.45% while in Madrid, stocks rose 1.63%.
– Turning to Asia, the Chinese data yesterday beat expectations slightly, which is what the market focused on. Westpac’s Phat Dragon reckons this masked the real underlying growth data which is looking weaker. In the end, the Shanghai exchange was up just 0.16% while the Hang Seng rose just 0.11%. All the action was concentrated in the Nikkei, which reacted favourably to the Yen weakness and BoJ governor Kuroda’s soothing words, posting a rise of 3% and looking strong as long as USDJPY remains bid.
– Speaking of currencies yesterday, the Aussie was under pressure before the Chinese data but it couldn’t rally materially finding sellers below 94 cents and it sits this morning at 0.9368. Euro sits at 1.3814 while the pound is up a little at 1.6793. USDJPY has hit a convergence of resistance around 102.20/40 and sits at 102.23 this morning.
– On commodity markets, Copper was the mover of the big three we watch, rising 4 cents to $3.05 lb while Gold sits at $1,302 oz and Oil has risen a little to 103.81 but well off the high of $104.90 overnight. On the Ags, we saw continued volatility with Corn down 1.19%, Wheat off 1.96% and Soybeans managing to rally 1.12%.
On the data front, just before the Easter break there is a bit of data out in Australia with the NAB’s quarterly business survey out along with vehicles sales. China is releasing foreign direct investment data and Japan has consumer confidence before PPI in Germany tonight. In the US, jobless claims are out along with the Philly Fed manufacturing data.
Most Western markets will be closed on Friday and Monday although Japan is open.
Here is CMC Markets’ Stock To Watch from Michael McCarthy, chief market strategist:
BHP and a slow burn
I know, I know. If you’re watching the market, you’re already watching BHP. However, yesterday’s production report means BHP bears a closer look over the next few trading days.
BHP surprised on iron ore. Both Rio and Fortescue reported production drops for Q1 2014 vs Q4 2013, mainly due to poor weather conditions. However, BHP reported a 1% increase – a clear outperformance. Unfortunately, this was offset by a drop in copper production, and fairly soft energy output. It’s easy to view all of this as priced in by the 0.4% lift in BHP’s share price following the announcement.
None of this is a reason to have BHP on the radar. The real reason is a slow burner – at least relative to the relentless 24 hour news cycle. Buried in the 46 page report was the news that BHP’s estimate of the Escondida resource increased by a whopping 28% after further exploration.
Escondida is the largest copper mine in the world. As analysts feed this increase into their models, valuations will go up. As this news hits fund managers’ inboxes over the next two weeks it is likely to have a positive effect. Easter and school holidays mean that the full impact of this change may not be reflected in BHP’s price for another couple of weeks, making it one to watch.
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