Hello, and welcome to Monday. You can do this.
– It’s almost boring to say but the Dow and S&P 500 set new all-time closing highs again on Friday. However marginal these new highs might be, the reality is that Janet Yellen (by saying this week that she didn’t believe the data) has made a remarkable departure from the central banker rule book and given sellers just another poke in the eye.
– Equally, while there are plenty of voices and views out there that the Fed Chair is wrong and will be caught behind the curve, Yellen seems to have signalled that she and her colleagues on the FOMC are comfortable with that notion.
– So at the close, with no data out, the Dow was 0.2% higher at 16,947, the Nasdaq rose a similar amount and the S&P 500 was also 0.2% higher, closing at 1,962.
– In Europe, the FTSE closed higher, up 0.25% to 6,825, but on the continent it was a sea of red. The DAX was down 0.17%, the CAC fell 0.48% while in Madrid stocks fell 0.29%. Stocks in Milan however, crashed more than 1%. Now, if you want a bit of anecdotal evidence of central banker-induced market excess then don’t miss this article from BI US about investors investing in a classic credit bull market bond.
– Bonds in the US were unchanged with the 10s closing at 2.61%. Rates in Europe were up a little with Gilts at 2.76%, up 2, while Spanish and Italian rates were up 4 points. German 10-year Bunds rose 1 point.
– On the ASX, the September SPI 200 futures rose 10 points to 5,391 after the really poor and somewhat unexpected hosing that we saw on the ASX on Friday when the physical finished down 0.9%. Iron ore ripped $2.50 higher on Friday, so this should help the tone today.
– In Asia Friday, the market was fairly subdued – which made the Aussie stock market fall all the more remarkable – with the Nikkei down 0.08% and the Hang Seng and Shanghai composites up 0.11% and 0.16% respectively. This week in Asia kicks off with the Chinese and Japanese flash PMIs today but in another cracking story from BI US is this story on the hard landing that isn’t.
– Turning to Currency markets and the US dollar came under some pressure before recovering to 102.06 against the yen. Sterling closed at 1.7010 and the Aussie is back below 94 cents at 0.9387. Euro closed just under 1.36 even though German PPI fell 0.2% in May to 0.8% year-on-year. Go figure!
– On Commodity markets, Iron Ore was really strong Friday as noted above, closing relatively strongly at $93 for the September contract. Newcastle Coal was down 30 cents tonne to $71.10 for September. Nymex June Crude was up 0.78% as things in Iraq get ugly and it closed at $107.30. Gold finished at $1314, down a little on the high in Asia on Friday, while Silver closed at $20.86 oz. Copper was really strong, up 4 cents to $3.12 lb. It was mixed on the Ags with Corn up 0.61% while Wheat fell 1.39% and Soybeans dropped 0.35%.
On the data front, we kick off today with the Chinese and Japanese flash PMI with the market looking for an uptick in China to 49.7. Tonight we have a raft of PMIs in Europe and the US.
It’s a quiet week but all the key data out can be found here.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
I made Santos my stock to watch in early June. It had come back to test the support of its 200 day moving average and price was diverging with the RSI (Relative Strength Index) in a sign of potential weakness. The market extracted the requirement for patience it so often imposes. However, Friday’s trading saw Santos down 2.3% in a clear break below the 200 day average and RSI support.
It’s possible that what’s going on here is a retracement of the rally from $13.11 to $14.74. Friday’s low hit the 38.2% Fibonacci level for that retracement. In these times of low volatility and shallow corrections, it feels brave to assume that this won’t be the end of it. Even so, unless or until the market takes out the $14.74 high, the safest assumption is that Friday’s sell-off will ultimately signal lower prices to come.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC