Phew. That was a long one, but it’s almost over now.
– Janet Yellen may have surprised markets last week by being far more dovish than expected after the FOMC meeting but St Louis Fed President James Bullard left traders with no uncertainty in his view that the Fed is at risk of falling behind the curve if unemployment drops.
– Bullard is not voting this year but warned rates could be rising by the end of Q1 2015 and said the US economy is “way ahead of schedule” on its employment trajectory. On that front, the jobless claims data printed 312,000 but the eight-week moving average has now fallen to a level consistent with “a clear acceleration in payroll gains to something close to 250K”, according to Ian Shepherdson at Pantheon Macro.
– Other data showed weaker-than-expected personal spending of just 0.2% in May against expectations of a rise of 0.4%, but income did grow at the 0.4% expected.
– So at the close, the three big indices in the US were slightly lower but solidly off their lows of the day with the Dow off 22 points to 0.13% to 16,846. The Nasdaq was largely flat, down just 0.02% to 4,379 while the S&P 500 lost 3 points to 1957.
– In Europe, stocks were lower on the continent with the DAX down 0.64% to 9,805 and the CAC was 0.46% at 4,440. The FTSE recovered after UK home builders somehow picked up after BoE Governor Mark Carney announced new macroprudential style rules to limit risky lending and improve financial stability in the UK. At the close of play, the FTSE was up 1 point to 6,735.
– The rally in global bonds continued both in its own right and as a warning to equity markets about what bond traders think about the economy and inflation. In the US 10-year Treasuries fell 3 points to 2.53% while Gilts, Bunds, Italian and Spanish 10s all rallied 1 basis point. Australian 3s finished at 97.29 (2.71%) while the 10s rose 1.5 points to 96.41 (3.59%).
– Locally for stocks, it was an interesting night in ASX futures trade with the July and August contracts off heavily, 29 and 30 points respectively, but the September contract up 5 to 5432 bid. It might be difficult for the market to kick substantially higher in trade today, given overnight moves offshore, but it is worth noting that Iron Ore rallied hard again overnight, up another $1.62 tonne to $96.75.
– In Asia yesterday, the Nikkei was 0.27% higher at 15,308, the Hang Seng rose 1.45% and Shanghai stocks were 0.67% higher at 2,039 after the debut of three new stocks – which soared – helped sentiment. After a fairly quiet week of data, Asia, or at least Japan, is going to be busy this morning with the releases of very important CPI data, retail sales and jobs data.
– In Currency trade, it was fairly quiet although sterling is back above 1.70 with GBPUSD at 1.7022. USDJPY is breaking down ever so slightly at 101.70 and euro sits at 1.3610. The Aussie is up marginally at 0.9412. FX is still in the low vol doldrums.
– But not Iron Ore, which is continuing to rip higher as noted above. Newcastle Coal futures for September delivery were up 25 cents tonne to $70.95. Nymex June Crude finished at $105.82 more than reversing the previous days’ gains. Gold is back at $1,316 oz after a bit of volaatility when news of $15 billion in fake Chinese gold deals hit the market. It’s failing this week at a very important trendline which may turn the price lower once again. Silver is at $20.86 oz and Dr Copper sits at $3.16 lb. On the Ags, Corn rose 0.4%, Wheat 0.87% and Soybeans was 1.5% higher.
On the data front, the Japanese releases are huge for Abenomics today and tonight we get really important UK GDP as well as French GDP Before EU business and investor confidence. Nothing of note in the US.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Amazon has been on the news radar recently with the release of its Fire smartphone. Opinions seem sharply divided on the prospects of success. Traders might also have this stock on the radar with the chart looking interestingly placed.
It hasn’t been a happy story for investors this year. By early May the stock was down 23% from its January peak. However, since then it has rallied to test potential trend line resistance. It’s also starting to form a minor downward sloping channel formation.
If there happens to be a rally from here, it will be interesting to see if it can break above this channel resistance. This would be a potentially bullish development and would have the added advantage of being a break well clear of the medium term trend line.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC