Phew. That was a long one.
– The weakness in Asia was yesterday was washed away overnight with stocks in Europe and the US higher and the S&P 500 making a fresh all-time high.
– The Dow was up 61 points or 0.4% to 17,040 while the Nasdaq gained 0.1% to 4,532. The S&P 500 rose 6 points to 1,992.35, its 28th new all-time high for the year apparently.
– There has been a lot of ex-poste rationalisation as to why the market keeps going higher, none of which I really find compelling. The key point is that the market, traders, investors, fund managers and so on just keep buying. Indeed, overnight the AAII investor sentiment survey came out with 46.11% of retail investors saying they are bullish – the highest level since December 26.
– Perhaps key to the constant inability of the market to go down could lie in this statistic. Even at the highest level for 2014, there are still a majority of respondents who are either neutral or bearish. It’s the perfect pre-conditions for what Dennis Gartman said is a market “melt-up“. Maybe it just doesn’t matter if investors are bragging about buying the dip.
– In Europe though, the bet is clearly on Mario Draghi and QE as the economy weakens. Last night’s flash PMIs were mixed, Germany (52) was a little better than expected while EU-wide (52.8) was weaker than expected. But at the close of play, the DAX was 0.94% higher at 9,402, the CAC kicked 1.23% higher while stocks in Milan and Madrid also rose up 2.07% and 1.30% respectively. In the UK, the FTSE rose 0.33% amid disappointing retail sales (+0.1% versus +0.4% expected).
– Today on the ASX it would be reasonable to expect a better day, with futures for September showing the SPI 200 is up 10 points to 5613.
– Another day with a lots of reports on the ASX with most interest likely in Seven West Media, Sims Metal and IOOF.
– Chinese and Hong Kong shares were hit by the weakness in the HSBC Flash PMI yesterday, which at 50.3 with all components weakening was a big miss. The Hang Seng fell 0.66% to 24,994 while shares in Shanghai fell 0.46% to 2,230 but well off the lows for the day. In Tokyo, the flash PMI was a beat at 52.4 which along with USDJPY weakness helped the Nikkei rise 0.85% to 15,586.
– On Bond markets, it was fairly quiet with small rallies across the board (yep, makes no sense if stocks are making fresh highs) with US 10s closing on 2.41% and German 10s finishing trade at 1%.
– On Currency markets, the buyers just couldn’t help themselves yesterday once London traders walked into the office and bought the Aussie from a two-month low to sit back above 93 cents at 0.9301 this morning. Euro is at 1.3280 and GBP still becalmed with weak retail sales at 1.6579.
– On Commodities, the sell-off in Iron Ore continued and September futures fell 0.75 cents a tonne to $90.25. Newcastle Coal rose 5 cents to $69.70 a tonne. Crude is now trading September and that contract rose 5 cents to $93.90, Gold fell $20 an ounce to $1,276 while Silver is at $19.41 overnight. On the Ags, Corn rose 0.76%, Wheat was 1.25% higher and Soybeans 1.47%.
On the data front, there is a drought of releases but that said, nothing matters except what Fed chair Janet Yellen says at Jackson Hole today. Draghi is also speaking.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Trend corrections often come in a three-part or “ABC” formation. I may be getting a bit ahead of things but oil and gas explorer, Karoon Gas, looks a candidate for this. If things do pan out this way, it implies a “C” leg rally that would see the share price above the June peak at $4.05 even if it backs and fills a bit along the way.
Flush with cash from its recent sale of leases to Origin Energy, Karoon has announced a buyback of 10 per cent of its shares. This creates the likelihood of a significant buyer keen to take advantage of any short-term weakness in its share price. The buyback news has seen investors again thinking about pushing Karoon past the resistance of its 200-day moving average for the first time for a year
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC
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