– The sell-off in stocks and risk assets that started in Asia yesterday continued during the European session as traders were stunned by the Tesco announcement that it had made a $408 million error in its first half accounts. The selling continues into the US session with Alibaba dropping 4.4% and taking Yahoo down with it.
– At the close, the Dow was down 107 points at 17,173 for a fall of 0.62%, the Nasdaq dropped 1.13% to 4,528 and the S&P 500 lost 16 points, heading back under 2,000 to a close of 1,994 and a loss of 0.82%.
– Datawise, the slowdown hit existing home sales in the US, which fell 1.8%, to a still solid annual rate of 5.05 million. The punditry had expected an increase to a 5.2 million.
– On European markets, stocks were lower also with the FTSE down 0.93% to 6,774, the DAX fell 0.50% to 9,750 and the CAC dipped 0.41% to 4,443. Stocks in Milan fell 1.43% and those in Madrid dipped 0.49%.
– On thing worth noting after the calls for a market top on Friday from Jesse Livermore is a note to clients from the legendary NYSE floor trader Art Cashin. Colleague Miles Udland from BI US says Cashin wrote in a note that September 22 was a market top in 1873, 1929, 1980 and even 2008.
– Locally, the impact has been on further losses on the ASX futures overnight with the December SPI 200 contract down another 8 points to 5,352 bid. The bad news is that after a poor day yesterday when the physical ASX lost 1.3%, iron ore crashed more than $3 a tonne overnight which will put the miners under pressure. Equally, the selling in the Aussie dollar yesterday reflects a change in sentiment toward Australia and Australian growth from global investors and analysts.
– On Bond markets, US 10s barely budged only a point to 2.57%, German 10s are back at 0.97% and UK Gilts closed at 2.50%.
– On Currency markets, the Aussie dollar was absolutely slammed overnight. China’s Finance Minister built on the poor sentiment in the forecast from Nouriel Roubini’s firm prediction that the Aussie dollar would fall to 75 cents when he dashed hopes for more stimulus. The Aussie sits at 0.8870 at the moment and seems biased toward the 85-87 zone.
– Elsewhere, the USDJPY looks like an interim top might be in with the rising angst in stocks and it sits at 108.80 this morning. GBP is at 1.6359 and the euro is at 1.2845.
– On Commodities, Iron Ore tanked to $77.75 for the December contract while December Newcastle Coal dipped 25 cents to $66.70 a tonne. Elsewhere it was a sea of red, with Nymex Crude off 0.96% to $91.52 a barrel. Gold is at $1,215 an ounce and Copper has dipped to $3.04. On the Ags, Wheat is up 0.34%, Corn fell 0.36% and Soybeans dropped 1.52%.
On the data, the Chinese HSBC Flash PMI can get things moving in Asia particularly for the Aussie dollar and ASX. We then get the usual flash Markit and HSBC PMIs across the rest of the day in Europe and in the US.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Charts with strong impulsive trends like this one, often create the best trading opportunities. The moves in either direction often remain powerful. These charts are also often easier to interpret than choppy, go-nowhere models.
As the uptrend clearly demonstrates, Caltex shareholders have enjoyed a major market rerate in recent months. Amongst other things, the agreement by the big supermarket chains to limit the extent of petrol discounting has improved the competitive landscape for Caltex. (Looking at the size of the rally in Caltex, I wonder if consumers have actually gained anything from forcing this change on Coles and Woollies or is it just shifting the deck chairs amongst different business owners?)
Anyway, the Caltex rally has recently lost momentum and there might be a couple of possibilities here:
A break below the dashed support line completing a double top like pattern. For bigger picture trend followers this might yield a deeper correction and a better value buying opportunities.
For more aggressive CFD traders it could be a quick shorting opportunity. Further sideways movement could form a triangle or pennant pattern. A break through the top of any triangle that does eventuate could see more upside.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC