– It was big night of crosscurrents, which showed that US CPI was up 0.2% last month, while UK CPI printed flat – no inflation. At the same time home sales in the US smashed expectations with a print of 539,000 – that’s more than 70,000 above expectations. Likewise US Markit PMI beat expectations with a 55.3 print against expectations of 54.7. In Europe eyes are back on Greece as the next deadline draws nearer and reports are that Greece will run out of cash by April 20 without fresh aid. But at least German (52.4) and EU (51.9) ‘flash’ manufacturing PMIs were stronger than expected.
– That gave traders much to think about and trade off. Initially, forex traders took the Euro right up toward the top of the range printing a high of 1.1029. But, it’s back at 1.0929 this morning in a sign it might be time for a pause/pullback for this run. Likewise the Aussie dollar hit a high of 0.7930, but is back at 0.7873 this morning as the US dollar regained some mojo with the better than expected data. It’s the first time we’ve seen important data print above expectations in some time.
– US stocks weren’t so keen, with small falls across the big three indices while European bourses were much better bid. The US began falling from mid-morning so the move looks sustainable into another session tonight. After a decent day yesterday where the ASX rallied 0.22% June SPI futures are off just 6 points at 5,971. Traders are clearly still eyeing the overhead trendline resistance.
– One thing to note, although it is neither a clear or present danger, is the comments from St Louis Fed President James Bullard who said the first hike will be sometime in the northern summer. But he warned that markets needed to get in sync with the Fed plans.
Reuters reports he said “I think reconciliation between what markets think and what the committee thinks will have to happen at some point,” But he added that it could be a “potentially violent (encounter) … and I am concerned about that. I am hopeful that markets and the policy committee can come to some kind of meaningful meeting of the minds in the coming months and quarters.”
In some ways we are all worried about how the two views are reconciled. Lately it has been the markets moving expectations of the when the Fed will hike. But as Bullard points out they are set on tightening sometime soon.
Here’s the overnight scoreboard:
- Dow Jones down 0.58% to 18,011
- Nasdaq down 0.32% to 4,994
- S&P down 0.61% to 2,091
- London (FTSE 100) down 0.26% to 7,019
- Frankfurt (DAX) up 0.92% to 12,005
- Paris (CAC) up 0.67% to 5,088
- Tokyo (Nikkei) down 0.21% to 19,715
- Shanghai (Composite) Amazing (see below) up 0.11% to 3,691
- Hong Kong (Hang Seng) down 0.39% to 24,399
- ASX Futures (SPI June) down 6 to 5,971
- AUDUSD: 0.7871
- EURUSD: 1.0920
- USDJPY: 119.72
- GBPUSD: 1.4845
- USDCAD: 1.2500
- Crude: $47.38
- Gold: $1,192
– In Asia yesterday the price action in Shanghai on the composite was remarkable. The Chinese ‘flash’ manufacturing PMI missed by a mile with a print of 49.2, the worst since April 2014’s 48.1. But it was a shocker! That knocked Shanghai down to a low of 5,601 before a 10 point drop on PBOC weekly repo’s and hope of more easing turned things around very quickly and stocks in Shanghai ground higher over the rest of the day to finish in the black. It was a remarkable performance but shows the power of stimulus. This China slowdown is bad news for Australia and iron ore prices, with Peter Hartcher telling Marius Benson on Newsradio this morning that Treasurer Hockey has knocked another $10 a tonne off the forecast price for iron ore in the Budget. That will reduce revenue by around $2 billion.
– Currency traders had a wild ride last night with the Euro trading with a 1.08, 1.09 and 1.10 handle overnight as it moved through the 1.0889 – 1.1029 range. GBP was knocked lower after the print no inflation during the month which reminded traders that the BoE has expressly said GBP strength is a threat to the inflation outlook. It also highlighted Andrew Haldane’s speech last week when he said that rates could go either way in the UK. For the Aussie it has remained relatively less volatile than the Euro but nevertheless still traded through a 100 point range.
– On commodity markets, gold is the one traders will be watching as it tries to break higher. Technically the $1,192/oz is a break, but with the Euro and other Forex reversals top of mind, the conviction of gold bulls wont be high. On the Bulks, iron ore for June rose 95 cents to $54.38. Newcastle coal for the same delivery rose 20 cents to $54.15 a tonne.
– Today sees the release of the RBA’s Financial Stability Review, which will attract more interest than normal given the RBA and APRA have been airing their concerns about the recent increases in investment lending. Elsewhere German IFO and US durable goods will be very important.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
M2 Group Limited
Shareholders in telecommunications company M2 have had a great year. The owner of the iPrimus and Dodo brands has nearly doubled in value since its low in April 2014.
However, traders thinking about taking profit might be interested in the latest chart pattern. M2 has formed a 3 drives to a high pattern as outlined on the chart below. Harmonic pattern traders look at this pattern as signalling a potential peak and the beginning of a downward move.
The RSI in the box below is providing another warning signal. It’s been diverging with price, making lower highs while price is still making higher highs.
Another possibility here is a couple of more bounces off the support and resistance lines. This would confirm a rising wedge pattern. Either way, a clear break below the support line would now indicate a potential downward correction in this stock.