– A big day for US and global stock markets as the S&P crossed the 2000 mark for the very first time. The intra-day high of 2002 is another example of what Dennis Gartman said last week was a market’s melt-up. Likewise, trading greats from a century ago like Jesse Livermore would say that having crossed this threshold, the marker is more likely than not to skip even higher.
– The interesting thing about the move was that it was, once again, counter to the data, which was a little on the weak side with services PMI printing 58.5 against 59.5 expected and 60.8 last while new home sales were down 2.4%. The Chicago manufacturing index was, however, on the bright side. Key to the rally seems to be thoughts that the Fed’s stimulus will soon be replaced by QE from the ECB.
– In the end, the Dow was 76 points higher for a gain of 0.45% at 17,077, the Nasdaq rose 0.41% to 4,557 and the S&P closed up 10 points to 1,998 just shy of the new all-time high. Readers know I don’t trust this market but if it is just going to transition from US QE to ECB QE as the driver then, as Deutsche Bank strategist wrote overnight in the US, “Buy Equities“. So not a great time to be sitting in cash.
– European stocks ignored the weaker-than-expected German IFO which printed 111.1, instead rallying, along with bonds, on the prospect of QE in Europe. The DAX was 1.83% higher to 9,510, the CAC in Paris was up 2.10% even as the government resigned – the power of free money. Stocks in Milan and Madrid rose 2.29% and 1.81% respectively. The FTSE in the UK – which won’t benefit from ECB QE – fell 3 points to 6,775.
– Locally, after a pretty good performance all things considered yesterday, the ASX futures are up overnight with the September SPI 200 contract up 5 points to 5,604. The miners might be a handbrake on the index though, with Iron Ore down another 75 cents to $89.25 a tonne and just 52 cents above the low for the year. As we highlighted yesterday this is a huge level.
– In Asia yesterday it was a mixed day with the Nikkei up 0.47% after BoJ Governor Kuroda delivered a speech at Jackson Hole suggesting he won’t be taking the foot off the pedal anytime soon. The Nikkei ended at 15,613 up 0.47%. The Hang Seng rose 0.22% to 25,167 while stocks in Shanghai slid 0.53% t0 2,229.
– Bonds, oh Bonds. What a night on European boards as the prospect of QE has driven peripheral yields lower with Spanish 10s down 16 basis points to 2.23% for a capital gain of 6.73% on the night – like tomato sauce on a bad meal, free cash fixes everything. Italian 10s dipped 12 points to 2.46% and German 10-year Bunds dropped 6 basis points to 0.93% for a capital gain of 5.79% on the day. US and UK bonds naturally – because their central banks are at different points in the cycle – missed to big moves, closing at 2.39% and 2.41% respectively.
– On Currency markets, the euro actually did really well overnight considering the French political ructions and the weaker-than-expected German IFO. It sits this morning at 1.3193, which is not bad all things considered. Sterling is at 1.6580 and the US dollar has slipped a little against the yen but is still very strong at 104.01. The Aussie dollar is back under 93 cents but still materially outperforming its larger rivals, gaining ground on the crosses as it sits at 0.9295 this morning.
– On Commodities, as noted above, Iron Ore is looking dangerously bearish. Newcastle Coal was unchanged at $69.65 a tonne. Nymex September Crude was down 22 cents to $93.43 a barrel, Gold is at $1,280 an ounce with Silver at $19.41. Copper rose 3 cents to $3.20. The Ags were mixed with Corn up 0.9%, Soybeans ripped 2.62% higher but Wheat fell 1.63%
– The data calendar is very light today, which means that there is little to derail Asian markets from last night’s moves. The Chinese leading indicator is out which could see some interest though. Tonight, Durable Goods in the US are out and they will be very important as a lead and read on the state of the US economy.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
The CBA had a nice bounce after going ex-dividend last week. For chartists, this sets up the $79.40 area as an obvious support level. It now has the following things going for it:
- The old high from November last year which now serves as support
- A trend line dating back to May 2012 AND
- The 38.2% Fibonacci retracement of the last major rally that began in February 2014.
A break below this support could bring the 50% retracement level around $78.00 into play. The 200 day moving average is currently at $78.20 adding to the possible significance of that level
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC
Business Insider Emails & Alerts
Site highlights each day to your inbox.