You’re halfway to Saturday. Stay on top with this morning’s update.
– After a poor day’s trade yesterday on the ASX, Australian traders are likely to have a better day today after US and European markets rose overnight. Indications at 7.25am are that the ASX will open up 23 points with the June SPI 200 contract at 5498 bid.
– It’s hard to gauge the real driver behind the positivity overnight, although the slightly lower German CPI (-0.2% MoM April and 1.3% YoY) suggesting that the ECB will be edging closer to quantitative easing certainly helped in Europe, as did the weaker-than-expected consumer sentiment and business climate in the EU. UK GDP also came in slightly weaker at 3.2% year on year and 0.8% on the quarter leading many commentators to say the Bank of England has the economy in a “sweet spot” with no need to raise rates.
– So at the close, European stocks were higher across the board. The FTSE rose 1.04% to 6,770, the DAX is up 1.46% to 9,584 while the CAC is 0.84% to 4,498. In Milan and Madrid, stocks were up 2.15% and 1.36% respectively.
– In the US, it was a mixed night on an individual share basis. Twitter is getting hammered on its results, luxury goods maker Coach did the same but Merck was higher on its results. Data in the US wasn’t materially different from expectations with Case Shiller home price rises moderating to 12.9% annual rate from 13.2% last month.
– In the end though, the Dow rose 0.53% to 16,535, the Nasdaq was 0.72% to 4,104 and the S&P regained 9 points or 0.48% to 1,878.
– In Asia with Tokyo out yesterday trade was fairly thin but stocks in Shanghai and Hong Kong rebounded from their recent lows. The Shanghai exchange was up 0.82% while the Hang Seng surged 1.45% to 22,454. The rally in Shanghai stands in sharp contrast to the fall in Australian resource stocks after authorities announced a clampdown on steel mill borrowings which hit the iron ore price. Today Japan releases a raft of data starting with the Nomura manufacturing PMI, industrial and vehicle production, housing starts and construction orders. But the key release will be the BoJ’s interest rate decision and statement. There is no data to be released in China.
– On Currency markets, Forex traders have knocked the euro a little lower to 1.3809 from a day’s high of 1.3878. The pound liked the fact that GDP didn’t miss by much and it is up at 1.6825 while the USDJPy is still range-bound. Looking at the Aussie, it found support at the trendline from this year’s low and sits at 0.9268 off a low of 0.9225 yesterday.
– Crude and Gold were a bit dull, closing at $100.79 Bbl and $1,294.80 respectively but the fall of 5 cents in Copper to $3.07 lb certainly is worth noting. On the Ags, it was back to the usual decent moves with Corn up 1.53%, Wheat rising 1.11% and Soybeans were 0.94% higher.
On the data front, in Australia today private sector credit will be released, which will be of interest to those worried about a housing boom/bubble. Japan is busy as noted above and in Germany, retail sales will be keenly watched tonight along with the unemployment rate. CPI data in Italy will be important along with EU-wide CPI in driving expectations about the ECB.
US GDP tonight and the FOMC decision will then cap off what is a huge day of data in the Northern hemisphere.
Here is CMC Markets’ Stock To Watch from chief market analyst Ric Spooner
Fortescue Metals Group
Most long term valuations of iron ore mining stocks assume lower prices but sharp drops in the spot price dent confidence as investors become nervous about just how far prices might fall.
In a development that traders will be watching closely over coming days, the Fortescue chart began to show signs of ongoing weakness yesterday with a sharp move below its 200 day moving average. Fibonacci traders will have $4.17on their radar. It represents a 61.8% retracement of the last major rally. At that price the swing down from B to C would also be symmetrical with the move from X to A (XA=BC).