– Germany manufacturing dipped to 50.0, right on the expansion contraction line, France went backwards to 47.6 and the EU flash PMI dipped to 50.4 against 50.8 expected. In the US, the print was a still solid 54.7 but that was well below the 56.4 the market had expected.
– There was more important data with German PPI printing a YoY fall of 1%, slightly worse than expected, while US CPI in October rose to a +1.7% YoY rate after prices were unchanged during the month, rather than the expected fall of -0.1%. In other US data, existing home sales blasted higher, up 1.5% against the expectation of no change and the Philly Fed manufacturing index bounced from 20.7 to 40.8.
– The wash-up of all of the above was European stock weakness which saw US futures down pre-trade and the physical market open down before lifting across the course of the day to finish in the black. The Dow rose 0.19% to 17,718, the Nasdaq was up 0.52% and the S&P 500 rose 4 points or 0.21% to 2,053.
– In Europe, the FTSE dipped 0.26% to 6,679, the CAC dropped 0.75% on that terrible data, but the DAX managed a little rally of 0.12% to 9,484. The periphery of Italian and Spanish stocks were lower with Milan down 0.88% and the IBEX dipping 1.62% in large part because of the BBVA capital raise.
– Locally it was a poor day yesterday with massive volume in Fortescue and an acceleration to the downside as the market closed. But overnight strength in the US and a slight recovery in the iron ore price has seen traders in the SPI 200 December futures contract push prices up 12 points to 5,329. This indicates a better day ahead but we’ll see.
– In Asia yesterday, the weakness in the Chinese flash PMI saw weakness in Shanghai early but the market recovered to finish just in the black at 2,453 up 2 points. The Hang Seng was off mildly, losing 0.1% to 23,350. Chances of a bigger stimulus would be very high if not for the fact that the current regime has a clear policy and mandate to target areas of the economy for reform. Personally, my sense is something will come soon. In Tokyo, the market was a bit nonplussed, with the Nikkei up just 0.07% but the results of the JMMA were encouraging for manufacturers. Unfortunately they highlighted that the weaker yen is the only trick that Abe has in his quiver at the moment.
– On Currency markets, the NAB Strategy team summed things up nicely this morning writing, “The USD lost some ground in a night where, by all rights, it should’ve gained. The price action in EUR/USD is remarkable in the way that dips toward 1.2500 were rebuffed, despite data from both sides of the Atlantic that should have invited a clear break below. We suspect the inability of USD/JPY to push through 119 helped keep a lid on the USD generally.”
– Yes indeed, the USDJPY is back at 118.03 off a high of 118.96 and where the yen goes, so goes the Aussie dollar at the moment. It has had a solid rally to be back at 0.8631 this morning. Euro is at 1.2546 and GBP at 1.5696 – looking a bit healthier.
– On Commodity markets, Dec 2014 iron ore rallied 69 cents a tonne to $70.01 but Dec 2016 fell $1 a tonne to $65.75. Newcastle coal dipped 5 cents to $64.65 a tonne. Nymex crude rallied 1.66% to $75.75, gold is up to something back at $1,194 and copper closed at $3.016 a pound. On the Ags, we saw a reversal of yesterday’s move with corn and wheat both more than 2% higher and soybeans up 1.7%.
– On the data front, there is nothing material in Asia today but ECB boss Mario Draghi is speaking again tonight. In the US, the Kansas Fed manufacturing survey is out.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
If you are thinking that the time will come when the current sell off provides a value opportunity in BHP, its chart support levels might be of interest.
Drawing lines around the lows of 2012 and 2013 indicates a zone of support around $30-$31. Of course iron ore and oil prices were higher then. On the other hand, BHP will be producing a lot more iron ore.
Chart wise, a clear break below these supports would be a worry.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC