Good morning. Here’s a great start to your day.
– The topsy-turvy trade pattern of up one day and down another continues as stocks in the US are trapped in a fairly tight trading range. Last night, weaker-than-expected results from staples helped push retailers down leading the market lower. Also hitting stocks was Philly Fed President Plosser intimating rates need to rise “if not now, then relatively soon”.
– In the end the Dow fell 138 points or 0.83% to 16,374, the Nasdaq fell 0.7% to 4,097 and the S&P 500 dropped 12 points or 0.64% to 1,873.
– In Europe, markets were lower but also proved the disconnect between reality and price action with Credit Suisse stock up 1% after the $2.5 billion fine in the US. Clearly this suggests that the stakes are so high that even a fine of this magnitude is acceptable. Anyway, enough editorial – in the end the FTSE fell 0.62% to 6,802, the DAX fell 0.21% to 9,639 and the CAC 40 fell 0.4% to 4,452. In Milan and Madrid, stocks went the other way, rising 0.3% and 0.27% respectively.
– All of which leaves the local market under more pressure after the late-day surge which turned a negative day on the ASX into a win. Overnight however, the June SPI 200 contract is down 29 points to 5400 bid. We’ll see how the market goes today.
– In Asia, it was a small sea of green yesterday with individual indices up in Tokyo (+0.49%), Hong Kong (+0.57%) and Shanghai (+0.14%) but the Asia-wide Asia Dow was 0.47% lower. Clearly that is a question of the construction of that index but also suggests that the rallies yesterday will take their lead from the US and European markets overnight and evaporate in trade today. It is another light data day with only Japanese trade and the BoJ decision to be released.
– On Currency markets, the Aussie and yen are the big movers and it is likely they are related somewhat via the Aussie yen cross and Aussie yen selling. Against the US dollar, the Aussie has slipped around 130 points this week to sit at 0.9242 this morning with a technical bias back to and under 92 cents. The yen is down at 101.27 and resting on the very important 200-day moving average and looking vulnerable. Euro is stuck around 1.37 and the pound sits at 1.6839.
– Turning to Commodities, May Nymex Crude is roughly unchanged at $102.51 Bbl, Gold sits at $1,290 oz, Silver is up 0.23% to $19.37 oz while Copper sits at $3.16 lb. The Ags were lower, with Corn down 0.79%, Wheat 0.70% lower and Soybeans down 1.16%.
On the data front today, the Westpac Consumer Sentiment data is due out and will be vitally important for local markets. The survey was taken after the budget and following on from the big fall in the ANZ Roy Morgan release yesterday, a big drop is expected.
Tonight, we get the details of the recent BoE meeting with the release of the minutes. EU current account is also out along with EU confidence. In the US, we get the minutes from the FOMC meeting recently and a raft of Fed speak including Fed chair Janet Yellen.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Woolworths’ share price is down 4.5% from its late April peak but is still a healthy 18 times forecast F15 earnings. This sort of valuation provides ample scope for a bit of a correction if the market gets nervous.
The chart also suggests potential for a deeper correction. There’s a decent case to say that the rally that ended at $38.92 was a classic Elliot Wave 5 wave advance. The recent decline to $36.42 is also straight out of the text book, bouncing off the 38.2% retracement level. In this situation you often see a corrective rally followed by another leg lower.
Right now the minor trend channel or “flag pattern” that’s formed in recent weeks might be useful. A break below the support could see the next leg down get underway. Otherwise we may see a somewhat larger corrective rally with a pop through the top of the channel.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC
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