Good morning. Here’s the story so far.
– An interesting night Friday with a focus on speeches from both Fed chair Janet Yellen and ECB president Mario Draghi. Yellen was more even-handed than many expected, noting both the strengths and weaknesses of the US labour market while Draghi was, well, a bit downbeat.
– Draghi highlighted what a moribund economic zone the EU has built and why I’m a tiny bit short euro as a lifestyle position – even though it’s still above 1.32 – and it is clear in his speech something needs to be done to fix the zone. But what? Joe Wiesenthal has a great take on the speech you can read here. One thing worth noting is that Draghi did say he’s ready to act further.
– Turning to the market on Friday, the Dow ended down 0.23% to retain 17,000 – just – closing at 17,001. The Nasdaq rose 0.15% to 4,539 and the S&P dipped 4 points to 1988.
– In Europe, it was a night of red ink. The FTSE only slipped marginally off 0.04% to 6,775 the DAX dropped 0.67% to 9,339 and the CAC was 0.93% lower. Stocks in Milan and Madrid were 0.46% and 0.53% lower.
– The impact locally was that the ASX futures fell 10 points to 5598 and Dec futures dipped 15. The chartist in me thinks the SPI 200 looks like Friday was technically a top. This week, traders will be watching the iron price, which fell 3.88% last week.
– Asian stocks were mixed Friday with the Nikkei down 0.30% while the Hang Seng gained 0.475. Stocks in Shanghai were up by the same amount after the price action in the US the night before. Traders won’t expect too much today given there is no data out.
– Bonds were strangely quiet. US 10-years finished at 2.41%, Bunds at 0.99% and Gilts also at 2.41%.
– On Currency markets, the euro heard what Draghi had to say and sold off down to 1.3240 its lowest level in 11 months on Friday but early Asia has slammed it a further 45 points back below 1.32. Sterling’s weakness continued as it fell to 1.6570 Friday but it is also lower this morning at 1.6547 and USDJPY was at 103.93 after a brief foray above 104 Friday but it has gapped to 104.17 this morning. The Aussie dollar was lower but still very strong at 0.9313 Friday before dipping to 0.9295 this morning.
– On Commodity markets, Iron Ore fell again and with September futures at $90 a tonne it’s not far off the low for the year. Newcastle Coal fell 5 cents a tonne with September futures closing at $69.65 a tonne. Nymex Crude fell 31 cents to $93.36 a barrel while Gold finished at $1,279 and Silver closed at $19.41. Copper climbed 3 cents to $3.20 a pound while Corn, Wheat and Soybeans rose 0.90%, 1.05% and 2.62% respectively.
On the data front there is nothing out in Asia today with the big release being German IFO tonight. In the US, the Markit service and composite PMI is out along with new home sales and Dallas Fed.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
The good news is that Australia’s iron ore exports to China during July were up 33.5% year on year. The bad news is that prices are again under pressure. The big miners are pressing on with their strategy of increasing sales at the expense of margin. The Tjianjin price is back down to $90 making a break below the June low of $89 a near term possibility.
Despite Rio Tinto’s profit result getting a big tick from investors, a head and shoulder pattern has developed on the chart since it went ex-dividend. A break below the trend line of the head and shoulder would be a short tem bearish indicator. This would bring the 200 day moving average and 38.2% Fibonacci retracement level around $63.75 into play for starters.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC
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