– The market giveth and the market taketh away. Last night was a giveth night with the reaction in Europe and the US to the Chinese GDP data very different to what we saw here at home and in Asia.
– Adding to the ebullience was news of the massive $US80 billion offer by Rupert Murdoch’s 21st Century Fox to buy Time Warner. Even though it was rebuffed, it set a solid tone.
– Also positive were comments from Fed chair Yellen in her second day on Capitol Hill that she is optimistic about the economy and in particular that growth is at a point sufficient “to support continued improvement in the labour market.”
– So at the close, the Dow was up 77 points to 17,138 for a gain of 0.45%, the S&P recovered 9 points or 0.44% to 1,982 but the Nasdaq lagged, up just 0.2% to 4,426.
– Also helping the market was the release of NAHB home builder confidence which rose to 53 from 49 but industrial production rose just 0.2%. The PPI was up 0.4%.
– In Europe, stocks rallied on the Chinese data and easing fears about Portugal, according to CommSec chief economist Craig James. At the close, it was a sea of green with the FTSE up 1.11% to 6,785, the DAX pushing 1.44% higher to 9,859 while the CAC was up 1.48%. Milanese stocks rose a ridiculous 3.17% while stocks in Spain were 1.83% higher.
– The upshot has been that locally, Futures traders have taken the September SPI 200 contract up 14 points to 5488 and it seems a positive day for the physical market beckons. Fortescue in particular is worth watching given proximity to its downtrend.
– In Asia yesterday, markets showed the difference between headline and underlying data. Yes, Chinese GDP hit expectations but the internals were not as strong as the headline. So Asia didn’t find the market too exciting and the AUD fell because traders focused on the housing data.
– So at the close, the Nikkei was 0.1% lower at 15,379, the Hang Seng was up 0.27% at 23,523 while stocks in Shanghai were 0.16% lower.
– On Bond markets, US 10s rallied 2 points to 2.53%, German Bunds fell 1 point to 1.20%, UK rates were unchanged at 2.65%. Italian bonds were 3 points lower while Spanish 10s had a huge 7-point rally. On the SFE, 3-year bonds were a point lower at 97.44 (2.56%) while the 10s also lost a point to 96.565 (3.435%).
– On Currency markets, the Aussie recovered off trendline support as European and US traders took a different approach to the Chinese data than those closer to it. It sits at 0.9365 this morning, well off the 0.9327 low. Euro’s woes continued, falling to 1.3526 this morning while sterling is at 1.7134. USDJPY continues to run on the spot at 101.69.
– On Commodity markets, Iron Ore drifted a smidge lower with September 62% Fe closing at $98.32. Coal tanked however, dropping $1.35 tonne for September delivery. It looks ugly but hopefully a low is near.
– Elsewhere, Nymex July Crude popped $1.56 Bbl to $101.52, Copper fell 4 cents to $3.20 lb while Gold is at $1,298 and Silver at $20.78. On the Ags, Corn rose 1.14%, Wheat was unchanged and Soybeans rose 0.57%.
On the data front, we get the NAB’s quarterly business survey at 11.30am which has a bigger set of respondents and more detailed questions than the normal monthly survey. Tonight’s CPI in the EU is huge while in the US we see jobless claims and the Philly Fed manufacturing index.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Rio has gained 12% since iron ore prices bottomed in mid-June. Yesterday’s production report was a reminder that the big miners have more than just price relief going for them. Unit costs are coming down as productivity initiatives gain traction and bigger volumes are pumped through existing infrastructure. In Rio’s case, a healthy increase in guidance for copper production also provided a nice boost.
Rio’s chart is showing some healthy signals. Buying saw it pushed back above its 200 day moving average yesterday. The last 2 days have also produced price gaps that look like the kind of break away and continuation gaps that are often followed by further gains.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC