Good morning. Here’s the score for Thursday so far.
– The world’s biggest macro market – currencies – has awoken from its slumber and is making a clear determination that rates in the US will head higher and that the US economy is getting close to a sustainable recovery without need of any Fed stimulus.
– Last night the US dollar rocketed higher and this morning is trading at 103.76 against the Japanese yen, 1.3257 against the euro, and 1.6595 against the pound while the Aussie dollar is so far more resilient than its major peers at 0.9288.
– This is important because with currency moves come asset allocation moves and that is likely to mean bonds and stocks coming under a little pressure. Not today, not tonight but with the FOMC Minutes reinforcing that the Fed is discussing the when, not if, of raising rates the paradigm that has existed in markets since 2009 is soon going to change.
– That’s for the future though and overnight the Dow and S&P were higher. The Dow was up 0.59% to 16,979, the S&P rose 5 to 1,987 while the Nasdaq was essentially flat.
– In Europe, there was another sign the economy is weak with the release of German July Producer prices which fell 0.1% against expectations of a 0.1% rise. No demand equals no price pressure equals a weak economy. So while the DAX climbed nicely off its lows on the back of US moves, it still closed down 0.21% at 9,315. the CAC fell 0.32% while stocks in Milan fell 0.20%. In Madrid, shares rose 0.33%.
– In the UK, the big news was the MPC cut. There were two dissenters inside the nine-man Bank of England board who think their colleagues are a little too worried about the market impact of raising rates. So the FTSE finished down 0.36% to 6,755.
– On the ASX futures overnight, the rally continued with the September SPI 200 up another 19 points to 5,625, the highest level since June 2008.
– On the reporting front, things slow down a bit today in terms of the big names. Still we have AMP, the ASX itself, Shopping Centres Australasia, and Treasury Wines reporting.
– In Asia yesterday, shares in Shanghai fell 0.24% to 2240, the Hang Seng was 0.15% higher to 25,160 while the Nikkei was little moved at 15,454.
– On rates markets, the US 10s closed at 2.43% up 3 points, German 10s closed at 0.99% and UK 10-year Gilts were up two pips to 2.42%.
– On Commodity markets, the crash in Iron Ore has kicked off again over the past week and September futures fell a massive $1.25 a tonne to $91.00. September Newcastle Coal finished down 5 cents to $69.65 tonne. Nymex Crude is getting volatile with a big rise of $1.59 a barrel after a similar sized fall the night before. August Crude finished at $96.40. Gold dipped to $1,288 and Silver finished at $19.45 an ounce. Copper surged 7 cents to $3.17 on what looks like a technical move to retest the old uptrend line. On the Ags, it was down with Corn off 0.83%, Wheat down 1.19% while Soybeans rose 0.07%.
On the data front, it’s PMI guesstimate day with the advance estimate of the HSBC and Markit manufacturing PMIs for August – yes, this month, which is why it’s a guesstimate. We’ll see China in our time zone and then Europe tonight and the US later in the evening. Of massive importance is the release in the UK with retail sales.
In the US we have the Fed’s symposium at Jackson Hole on and tonight we see jobless claims, Philly Fed and existing home sales data.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
If at first you don’t succeed …… Despite news of a bigger than expected write down in the book value of its Lihir mine, Newcrest’s share price continues to flirt with trend line resistance.
This trend line looks like it could be the neck line of an inverse head and shoulder pattern. For chartists, a clear break through this resistance could signal renewed confidence in this much maligned stock.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC
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