– Traders didn’t exactly rush back to the office to buy stocks after the President’s Day long weekend in the US. Perhaps it was the weaker than expected data. The NYC Empire manufacturing survey dipped a little to 7.78 from 9.95 last. The NAHB housing market index was also a little weaker at 55 from 57 last. Undoubtably marginal on both counts, so it might have been the big bond sell-off which sapped the reasons to excitedly buy stocks at all-time highs.
– Elsewhere Greece is still the word, according to the NAB’s senior economist David deGaris, who wrote this morning that Greece has been given until Friday “to apply for an program extension, but the terms still appear unacceptable to Greece. Tsipras’ continues to use strong rhetoric in a speech to the Greek Parliament, saying he is on no hurry and will not compromise.”
– We still have to assume sense will prevail and that neither the German-led Eurogroup or Athens will open Pandora’s Box through lack of agreement. But, German language interviews and reports of German finance minister Schaeuble’s comments reek of belligerence. Perhaps he should read BBC Economics editor Robert Peston’s piece explaining that Greece is a bigger risk to the EU concept than leaving the EU is to Greece. Probably not though, because he doesn’t want to renegotiate with Spain and others.
– On the European data front, the German ZEW sentiment survey dipped a little to 53 but there was a big jump in the current situation component which rose to 45.5 from 30 in January. EU-wide sentiment printed slightly stronger than expected at 52.7. That’s a nice jump from January’s 45.2. This data helped euro squeeze a little higher overnight.
– At the close, the scoreboard in the US reads:
- Dow Jones up 0.16%, 29 points to 18,048
- Nasdaq up 0.11% to 4,899
- S&P up 0.14% to 2,100 – WOW
– European markets at the close:
- London(FTSE 100) up 0.6%, 41 points to 6,898
- Frankfurt (DAX) down 0.25%, 27 points to 10,898
- Paris (CAC) up 0.04%, 4,754
- Milan (FTSEMIB) up 0.47%, 100 points to 21,266
- Madrid (IBEX) up 0.08% to 10,698
– Locally, after a down day yesterday, futures traders are pointing to a better open this morning. March SPI 200 futures are up 20 points to 5,840.
– In Asia yesterday, the Nikkei dipped back a little (-0.1% to 17,987) after hitting an eight-year high recently. Weak GDP anyone? Not stocks traders. But this fall was related to selling a big index heavyweight. The broader Topix index rallied 0.2% to 1,462 which is the highest close since December 2007. In Shanghai, Chinese New Year Eve saw stocks end on a high note before the holidays this week. The index finished up 0.76%, 25 points to 3,247. In Hong Kong, stocks were also higher, up 0.24% to 24,785.
– On rates markets, comments by Fed President Plosser that the FOMC should drop the patient language at the next meeting and that 1-0.5% Fed funds by the end of this year – yes, 10 months – was reasonable. That meant that US 10s sold off another 8 points to 2.14% as traders worry that the minutes out tonight might reflect the change in thinking. In the UK, 10-year Gilts drifted higher as well, up 7 points to 1.76% while in Germany, 10s closed at 0.34%.
– On currency markets, there was a short squeeze in the euro which has lifted it back to 1.1418 this morning. Forex traders are still watching Greece closely but an agreement is bullish for the single currency. The yen is higher at 119.23, likely via some AUDJPY buying on the back on the Toll/Japan Post M&A news overnight. GBP is at 1.5356 and the Aussie has nicely reclaimed 78 cents at 0.7812.
– On commodity markets, gold is lower and about to test very important medium-term support. It’s at $1,208.44 an ounce this morning. Copper dipped a little to $2.587 while Nymex crude is up 0.76% to $53.18. Interestingly, Newcastle coal, which is energy as well, was knocked quite a bit last night. March coal dropped $1.65, but it was the smashing of the curve, with every single contract out to 2021 falling at least $1.30 a tonne, which is the interesting news. On iron ore markets, the March contract didn’t move materially, closing at $64.07.
– On the data front today we have leading index of economic growth from Westpac and a Chinese New Year holiday. In the UK tonight, the MPC cut will be very important in gauging when, if, the BoE will hike in 2015. Equally, the employment data in the UK will inform that debate. In the US, building permits and PPI are important but likely to be overshadowed by the release of the FOMC minutes tomorrow morning our time.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
The big jump in grocery supplier Metcash yesterday makes it a stock to watch. The operator of the IGA supermarkets franchise saw its share price jump 8%. Even after this move it is only trading around 8 times forecast earnings.
Yesterday’s move saw it narrowly breach the neck line of a head and shoulder pattern. While it is not yet convincingly through this resistance, yesterday’s big move with a close near the high hints at ongoing buying momentum. The next potential resistance comes in the form of the mid December low and 55 day moving average around $1.68/$1.70
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC