– August trade is often fairly light and that was the case last night in what was a fairly positive night for stocks and the US dollar. It wasn’t so positive, however, if you’re long bonds – there was an easing of geopolitical tensions as Ukraine talks continue and ISIS had its grip on the dam in Iraq shaken loose.
– At the close, the Dow was up 175 points or 1.06% to 16,838. The S&P 500 rose almost 17 points or 0.85% to 1,972 and the Nasdaq traded to its highest level since 2000 at 4,508, up 0.97%.
– If bad news was good news last week then it would be disingenuous to say today that stocks rose because of the strength of the NAHB home builder confidence system. It leapt to 55 – a seven-month high. Rather, if you look dispassionately at the moves in stocks and bonds, it really feels like it has more to do with ISIS and Ukraine than any actual market- or economic-induced factors. Equally though, the big sell-off in bonds – see below – suggests that some traders think they have come too far, too fast, at least for today.
– In Europe, the catch-up from Friday’s move happened early and stocks keep moving higher. The DAX ripped 1.68% higher to 9,245, the CAC was 1.36% higher to 4,231 while the FTSE was positive but lagged up 0.78% to 6,741. Stocks in Milan and Madrid were 0.82% and 1.28% higher respectively.
– It all adds up to a positive day ahead for the ASX with overnight futures trade showing the September SPI 200 futures were up 25 points to 5,554. There is also a raft of important company reports today including Arrium, BHP Billiton, IAG, QBE and Toll.
– Turning to bonds now and there was a big shift in global bonds with sellers across the board. US 10-year Treasuries rose 6 points to a still low 2.39%, German Bunds were absolutely poleaxed, losing 6.66% of their capital value with a sell-off of 6 points to 1.02% – ugly! UK 10-year gilts lost 10 points to 2.43%. Italian bonds sold off 2 points and Spanish bonds were 8 points higher. Now clearly these rates are all super low but at these levels the capital volatility of a 1-point move is huge.
– In Asia yesterday it was fairly quiet, so we’ll get plenty of catch-up today. Shanghai was up 0.55%. We are waiting on Japanese trade data today which will give a further window into the enduring efficacy, or not as may be the case, of Abenomics.
– On Currency markets, the euro is down a little at 1.3363, USDJPY is back at 102.57 and sterling is sitting at 1.6726. The Aussie has hardly moved and this morning remains fairly steady at 0.9318.
– On Commodity markets, Iron Ore’s reversal of its reversal off the lows seems in train with the break of an important technical level overnight and a fall of $1.30 a tonne to $92.33. September Newcastle Coal was also down, but a more modest 35 cents a tonne to $70.30. Nymex Crude fell 79 cents to $96.56 a barrel while Gold lost another $6 to $1,298 an ounce. Silver closed at 19.58 and Copper rose 1 cent a pound to $3.11 while the Ags saw an amazing one-day fall of 7.49% for soybeans and a 7% fall in oats. Corn rose 1.37% and Wheat were much more quiet at 0.47% higher.
On the data front, it is another quiet one locally with only the release of the RBA minutes to trouble the scorer. Of course, it’s a heavy day of company reporting as noted above. Offshore, UK and US CPI are the key out-turns on the data front and will inform expectations about the path of interest rates for both the BoE and FOMC.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Yahoo and the Alibaba IPO
A couple of weeks ago I wrote about resistance on the Yahoo Inc chart being a useful line in the sand for traders interested in the Alibaba IPO. This looks like being the biggest IPO for 2014 and Yahoo which owns a 24% stake will be off loading 140m shares into it.
Yahoo’s chart suggests that last night’s session was the one in which traders decided they could wait now longer. Price broke clearly above both its 200 day moving average and trend line resistance. The fact that it created a price gap in doing so is another sign of potential upward momentum.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC
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