– Is crude oil finally basing? It just might be according to Saudi Oil Minister Ali al-Naimi who last night expressed the view that markets were now calm with demand growing. Certainly 1, 2 or 3% moves each day isn’t exactly calm but he might have a point. Last night the EIA reported a stock build in the US of 8.4 million barrels last week. That’s more than twice the expected 4 million build and takes overall US stockpiles to a new high. BUT, Nymex crude rallied 2.9% ($1.43) to $50.71. That’s not supposed to happen when the stock overhang is growing, so Al-Naimi might be right. Equally, the better than expected print for the “flash” Chinese PMI in January which printed 50.1, back in expansion, likely helped too.
– Stocks were essentially becalmed in the US and Europe in an index sense but the US dollar was under pressure. No doubt some of this is pent-up selling now that the Greek drama is behind us. The perception that Fed chair Yellen was dovish (i.e. delayed rate hikes) is gaining traction, which is a US dollar negative. Equally, there does seem to be some follow-through positivity for global growth – or at least risk-on – from QE, company results and the US recovery which is helping the Aussie dollar and the Commodity bloc currencies in general. Last night the Aussie touched the 79 cent level and while it hasn’t pushed on yet the mood has brightened. Sterling is higher as well.
– On the bond market, Germany issued 5-year bonds at negative rate, -0.08%. There’s your explanation why even Aussie bonds near all-time lows are still attractive to offshore investors. It’s also plain why Aussie and Kiwi dollars are rising once more.
– At the close, the scoreboard in the US reads:
- Dow Jones up 0.09%, 16 points to 18,225
- Nasdaq down 0.02% to 4,967
- S&P down 1 point to 2,114
– European markets at the close:
- London(FTSE 100) down 0.21%, 15 points to 6,935
- Frankfurt (DAX) up 0.04%, 11,210
- Paris (CAC) down 0.09% to 4,882
- Milan (FTSEMIB) down 0.96% (!), to 21,937
- Madrid (IBEX) down 0.13% to 11,050/li>
– The debate about the sustainability and durability of the ASX rally continues. That will delight some old time bulls who love to see a market “climb a wall of worry”. Yesterday’s up move of 0.3% was another fresh 2008 high with the close at 5944. But overnight SPI traders took the March contract down 19 points to 5900. Perhaps the 1% fall in iron ore has weighed?
– In Asia yesterday, the Nikkei dipped slightly from its 15-year high with a fall of just 0.1% to 18.585. Shanghai didn’t come back with any of the pent-up buying that I thought it might have and couldn’t even benefit from the surprise news that the “flash” PMI snuck back into expansion territory. At the close, stocks were down 0.55% to 3,229. In Hong Kong, the Hang Seng was 0.11% higher at 24,778.
– US bonds rallied 2 points to 1.96%, UK gilts fell 4 to 1.72% and German 10s dipped to close at 0.28%. That’s incredible but it once again underpins why even with a weak economy, stocks are rising.
– On currency markets, the Commonwealth reigns supreme with sterling, Aussie, Kiwi and the Loonie (Canadian dollar) all stronger overnight. GBP is at 1.5522, the Aussie is at 0.7890, CAD 1.2420 and the Kiwi is at 0.7540. Euro is lagging at 1.1350 and USDJPY is at 118.81
– On commodity markets, as discussed above, crude is up. Copper has quietly popped to $2.66 a pound from below $2.60 last week which suggests it too might be sensing a chance in the global economic outlook. Let’s face it, oil at these prices may be bad for Boeing but it’s great for global growth. Gold is at $1204 while on the bulks, iron ore has dropped 62 cents a tonne to $62.57 while Newcastle coal has continued its reversal from the recent foray above $70, closing at $66.55.
On the data front today, we get the release of Private New Capital Expenditure in Australia. But it is a huge night offshore with the release of German unemployment, UK GDP, US CPI, and Durable goods. HUGE.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Upward momentum is faltering in this chart creating the potential for a downward correction.
This situation is highlighted by the MACD indicator. This is a dual purpose indicator designed to say something about both trend and momentum. Recently the black MACD line began to roll over while price itself continued to rise. This indicates declining momentum and divergence between momentum and price.
In the past three days the black MACD line has crossed below its moving average (the red signal line). The circled histogram bars show this. When they move below 0, the MACD line has moved below its moving average. This indicates a change in trend from up to down. The best signals occur when the MACD line itself is a long way above 0 which is the case here.
In summary, the MACD is signalling momentum divergence followed by a trend change from a high level. This situation tends to produce either a period of sideways consolidation or a full blown correction making NAB a stock to watch.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC