– An interesting night with the Fed minutes showing the FOMC is still grappling with the how of its exit from super accommodative monetary policy as well as the when. The minutes reported that the Fed is looking at “several approaches” for tightening. This discussion and the obvious lack of clarity, together with the Fed’s comment that inflation remains low and won’t hurt the pursuit of more employment, emboldened stock bulls but hit the US dollar a little which had been doing well.
– At the close, the Dow was 0.97% higher with a rise of 159 points to 16,533. The Nasdaq rose 0.86% to 4,132 while the S&P 500 more than doubled yesterday’s drop, rising 15 points for a gain of 0.81% to 1,888. The range trading continues.
– In Europe, Craig James from CommSec reports that Danish shipping giant A.P Moller-Maersk beat profit forecasts, suggesting the global economy might be doing okay, which lifted its shares 3.9%. The FTSE was up 0.28% to 6,821, the DAX rose 0.61% to 9,698 while the CAC rose 0.37% to 4,469. In Milan and Madrid, their high beta status ensured bigger rises and they printed 1.07% and 0.74% respectively.
– The above has left the ASX Futures up 23 points overnight with the SPI 200 June contract sitting this morning at 5457. The recovery in iron ore overnight which saw rises of around $1.50 tonne in futures markets overnight will also help the local market today.
– Like bellwether US stocks, those in Asia are also bouncing up and down on the spot with the Nikkei managing to hold above the recent lows over the past three days. Even though the Nikkei closed down 0.24% at 14,042, it was actually up from the open and then the midday lows. In Hong Kong, stocks barely moved while Shanghai rose 0.84% to 2025. All eyes today will look to the HSBC Flash Manufacturing PMI release.
– Turning to Currency markets, the Aussie dollar has staged a pretty solid recovery from a low of 0.9205 and is back around 0.9250 at the moment. The Aussie fall was largely halted by a turn in the US dollar’s fortunes after the FOMC minutes. The euro came back from a low of 1.3634 and has rallied 50 points to 1.687, sterling ripped higher on the back of strong retail sales which rose 1.3% in April against 0.5% expected and the pound sits at 1.6899 this morning. USDJPY had an incredible move which the day-on-day change of just 0.7% completely masks. At one point last night, USDJPY sat at 100.80 before rallying back to sit at 101.38 this morning.
– Commodity markets suggest that the $1.39 a litre I paid for petrol yesterday won’t last, with June Nymex crude up $1.52 to $103.85. Gold is down $6.50 to $1,287 and Silver is largely unchanged at $19.30. Copper fell 3 cents a pound to $3.13. On the Ags, Corn hardly moved, Wheat fell 0.93% while Soybeans ripped 2.33% higher.
Today on the data front we get Australian consumer inflation expectation, HSBC Manufacturing PMI, the Japanese BoJ Economic survey and then tonight a raft of European and US flash PMIs. Also out and of great import is UK Q1 GDP before retail sales, existing home sales, jobless claims and Kansas Fed survey in the US.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Yesterday’s announcement that Woodside was terminating its agreement on the Leviathan gas project in Israel created a knee jerk reaction that saw the drop 3% in quick order. As the chart shows this was promptly recovered with Woodside closing up 0.8% on the previous day.
For me this little episode serves as a reminder of some of the background features of the oil and gas industry
• All new projects carry large risk. This comes in the form of various combinations of price, cost, technical, environmental, financial and political risk
• In recent years markets have tended not to attribute much value to potential projects until there is a fair degree of certainty that they will produce
• The difficulty of getting new projects underway underscores the value of good quality existing assets
• The value to shareholders of a pragmatic, conservative management team that ensures a reasonable chance of only being involved in projects with a decent risk: reward profile. Woodside will need to invest to restore its growth profile at some stage in coming years but for big picture investors there is no hurry.
In the meantime, despite bullish “hammer” candles in the last couple of days recent price peaks in this chart have shown divergence with the RSI and giving it the overall look of a stock that is still correcting the last major rally.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC
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