Good morning. Here’s your Tuesday heads-up.
– Stock markets were off a little in the US and a lot in some European markets as the geopolitical risk surrounding the increased pressure on Russia over Ukraine was top of mind for traders across many markets overnight. Gold was up a little also but Nymex Crude really surged as tensions rose.
– It’s all a natural reaction to increased uncertainty after the long period of low volatility. But leaving aside the move in oil, it’s all very orderly at the moment. It seems that traders are alert but not alarmed.
– So at the close, the Dow was down 48 points for a loss of 0.28% to 17,052, the Nasdaq was 0.16% lower at 4,425 and the S&P 500 lost just 4 points after being down 12 at one stage to end 0.21% lower at 1,974.
– In Europe, German PPI showed that year-on-year prices fell 0.7% as expected but the primary focus was to the East and the implications of the MH17 downing. Britain is out seeking a strong rebuke and sanctions of Russia but with 30% of its natural gas sourced in Russia, Germany has said it’s too soon for blanket sanctions. It’s a test for the EU and there is a big meeting tonight.
– At the close in Europe however, the DAX fell 1.11% to 9,612, the CAC fell 0.70% to 4,305 while the FTSE was 0.32% lower at 6,728. In Milan, stocks tanked 1.48% while Spanish stocks dropped 0.48%.
– Locally, the ASX looks set to open lower and even though September SPI 200 Futures were only off 4 points at 5,495, the risk is of further selling of the miners and the banks today.
– On Bond markets, the bid tone persists as a result of the geopolitical tensions and no doubt because of the potential economic disruption any escalation of tensions or sanctions on Russia will have on economic growth – especially in Europe.
– German 10-year Bunds closed down a point to 1.15% while Italian and Spanish bonds were 2 and 5 points lower respectively at 2.67% and 2.57% – go figure. In the US, 10-year Treasuries were down a point to 2.47% while Gilts closed unchanged at 2.57%.
– In Asia yesterday, with Japan out there was mild disquiet with the geopolitical tensions and stocks in Hong Kong and Shanghai traded lower. The Hang Seng closed down 0.29% to 15,216 while stocks in Shanghai were 0.25% lower at 2,054.
– On Currency markets, traders are pretty bored even if they have a slight USD bid tone. This morning the Aussie is a bit lower at 0.9370 while Euro sits at 1.3523. Sterling sits at 1.7074. Watch USDJPY though – if it heads down through 101 we’ll know something is up.
– On Commodity markets, the Iron Ore rally is so far proving as ephemeral as any hope of a Collingwood flag this year, with September futures down another 63 cents a tonne to $94.50. Newcastle Coal, on the other hand, was unchanged at $67.65 tonne.
– On Nymex, as noted above, the price of oil leapt higher with July Nymex light crude up by $1.46 Bbl to $104.58. Gold gained $4.50 to $1,313.40 and Silver settled at $20.91. Copper is at $3.19 lb and the Ags were at it again as Corn tanked another 1.95%. Wheat fell 0.42% while Soybeans were largely unchanged.
On the data front today, we get a speech from RBA governor Stevens at the Anika Foundation at 1pm. This speech has become one of his most important thematic speeches each year, so it is worth keeping an eye out for.
Elsewhere, RBA assistant governor Debelle is speaking and the Chinese and Japanese leading indices are out. Tonight there is not much in Europe save for the EU meeting on Russia and Ukraine but in the US we get the mega-important CPI data for June along with home sales data, Richmond Fed manufacturing survey and the Redbook index.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
After rallying 15% from its mid-June low, Rio’s chart began to display signs of weakness last week as the spot iron ore price softened. This sign of weakness came in the form of an “Island Reversal” pattern in which Thursday’s candle was isolated by price gaps on either side of it.
The latest trend looks to have taken the form of a 5-swing advance. This suggests that if price breaks below the old high labelled “3” as well as the 200-day moving average, then Rio may correct the recent rally before it moves higher again.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC