Good morning. Here’s the best start to your week.
– Time will tell on that front but at the close, the S&P reversed off a 2019 high to be down 1 point to 2,010, the Nasdaq dropped from 4,611 to close at 4,580, off 0.29%, while Dow eked out a gain of 0.08%.
– In Europe, UK stocks were up 0.27 with the FTSE closing at 6,838 while the DAX was largely unchanged at 9,799. In Paris, the CAC dipped 0.08% to 4,461 and in Milan, stocks dropped 0.74% and in Madrid they rose 0.10%.
– Geopolitics and Ukraine is off the radar a little but I wonder what the heck the Russians are up to. Last week we heard news that US and Canadian fighters intercepted Russian bombers and fighters heading toward Alaska and Friday we heard news (via ForexLive) that UK fighters were scrambled to intercept two Russian bombers. Sabre-rattling but very strange.
– Locally, the December SPI 200 contract reversed course as US stocks dropped from their highs and closed Saturday morning down 18 points to 5,407.
– In Asia, with the USDJPY rate above 109, the Nikkei ripped higher on Friday, up 1.58% to 16,321. The Hang Seng rose 0.57% and in Shanghai, stocks were 0.56% higher. There is virtually no data anywhere today so currency matters matter.
– On Bond markets, US 10s rallied 4 points to 2.58%, German 10s fell 4 to 1% and UK 10-year Gilts dipped back to 2.53%.
– On Currency markets, the US dollar is in the ascendancy and on a very quiet data week, only short-term exhaustion can probably derail what is becoming a big shift in global markets toward US dollar strength. Indeed, the Aussie and yen both look like prime candidates for a pullback at sometime soon but until then the trend is your friend. They sit this morning at 0.8932 and 109.02 respectively. The pound had a cracking run of buy the rumour, sell the fact, making a high around 1.6525 before reversing course when all the buyers were done. It closed at 1.6290 where it sits this morning (ouch). Euro is lower as well at 1.2826.
– On Commodities, December 62% Fe futures fell $1.44 a tonne to $81.08. Newcastle Coal for the same month fell 10 cents a tonne to $66.95. You’d expect commodities to struggle in a period of US dollar strength that is not yet associated with really strong growth. Indeed, the G20 over the weekend called out Europe for its weakness. Crude dipped to $2.45 a barrel, Gold is at $1,217 and Silver tanked 3.94% to $17.79. Copper managed to hold at $3.09 a pound and on the Ags, Wheat dropped 2.74%, Corn fell 2.01% and Soybeans dropped 1.56%.
On the data front there is absolutely nothing important out today. but tomorrow we get the preliminary PMIs around the world.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
BHP has reached the top end of a potential support zone between about $35.40 and $34.35. It does so at a time when iron ore prices continue to fall and momentum oscillators like the slow stochastic, although nearing the oversold zone, and are still trending down sharply.
From a chart point of view, the current support level looks like quite an important test. The lower boundary of the support zone is formed by last October’s lows. If this doesn’t hold, it’s pretty much blank paper until the next major level around $31.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC