It’s Melbourne Cup Day.
– But with retail sales and the RBA rates decision, the Aussie dollar falling out of bed and iron ore and coal tanking, there might be a little more alcohol restraint than usual for Australian traders today. Maybe.
– Turning first to the overnight action and there was some good economic news in the eurozone with German Markit PMI rising to 51.4 from 49.9, but still weaker then the 51.8 expected. Overall, EU PMI came in at 50.6 but Italy (49) and France (48.5) are both still contracting. However, Spanish PMI printed better than expected at 52.6. UK PMI (53.2) was also stronger but the US version of the Markit PMI (55.3) and the longer running ISM manufacturing PMI really shot the lights out, printing 59 up from 56.6 last.
– It suggests that the US economy recovery is gaining traction. The reason we focus on Purchasing Managers Intentions is that they should reflect intentions and expectations from business about the economy down the track, so it’s a positive economic forward indicator for US growth.
– But at the close, after making a new all-time high at 2,024, the S&P 500 is flat at 2018. The Dow has slipped 25 to 17,366 for a 0.14% loss while the Nasdaq rose 0.18% to 4,639.
– Europe stocks slipped across the day, no doubt worried by a weak economy and no desire – currently – by the ECB to do anything other than throw words at it. At the close, the FTSE 100 dipped 0.89% to 6,488, the DAX dropped 0.80% and the CAC fell 0.92% to 4,194. In Milan and Madrid, stocks were 2.1% and 0.99% lower.
– Locally, the December SPI 200 contract at 7.30am is down just 2 points to 5,489. That’s not bad considering that iron ore and coal were both poleaxed overnight, losing 91 cents and $1.15 respectively.
– In Asia yesterday, Japan was out for Culture Day but stocks in Hong Kong dipped initially and then fell throughout the rest of the day, closing down 0.34%. In Shanghai, the non-manufacturing PMI and manufacturing PMI painted a picture of a weakening domestic economy but stocks rallied 0.41% to 2,430 on the back of state-owned enterprise reform and asset purchases via both the Guangzhou Shipyard and Sichuan Electric Co.
– On Rates markets, the rally in US stocks pushed 10-year Treasuries just a point higher to 2.35%. In Europe though, UK 10s were up 3 points to 2.28% and German 10s closed at 0.82%, up 2 points.
– Currencies moved aggressively again overnight with USDJPY trading an almost 200-point range with a low of 112.41 and a high of 114.20. It’s currently back at 113.72, surely overdone up here. If it is, that will hit the Aussie dollar which is under pressure again this morning at 0.8688. It’s at 98.85 against the yen, off a high of 99.41 and looking toppy, as we traders sometimes say. Elsewhere, the phenomenal staying power of the euro was in evidence again and it sits at 1.2492 off a 1.2441 low. GBP sits at 1.5987.
– On Commodity markets, crude is getting crushed again down 2.72% to $78.35 while iron ore and coal were also smashed, with the latter making a 5-year low of $63.15 a tonne – the Hunter Valley will be feeling the pressure. Elsewhere, copper is hanging in at $3.06 a pound, gold slipped to $1,165, corn and wheat were largely unchanged but soybeans dipped 0.54%.
On the data front, it is huge for Australia today with the release of retail sales, trade and the RBA. In Japan, they get their manufacturing PMI from the JMMA while tonight we get PPI in Europe and trade, ISM New York and loan officers survey.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Today may not be the day, with the iron ore price drifting a little lower yesterday. However, any good break through the top of the “Flag” resistance on the Rio chart over the next few days could indicate further upside.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC