– Frankie Valli would have been proud as stocks around the globe ignited to start the new quarter with solid rallies as the Dow and S&P finished at new highs. Bonds in the US and UK were higher and a general feeling of “risk on” pervaded markets.
– The Aussie, Kiwi and Canadian dollars were higher, sterling rallied also and Iron Ore reversed its two-day swoon, up $1.33 a tonne.
– It wasn’t the data which seemed to ignite things, unless it was the not-bad Chinese PMIs yesterday and a recognition of the change in the deposit to loan (leverage) ratio changes announced in China the day before. More likely, given that Asia, the US and Europe all erupted out of the blocks, it was asset allocation moves for the new quarter and, to be frank, “more buyers than sellers”.
– At the close, the Dow was 129 points higher for a rise of 0.77% to 16,956. The Nasdaq ripped 1.15% higher to 4,459 and the S&P finished at 1,973, up 13 points or 0.65%
– Datawise in the US, the Markit manufacturing PMI printed 57.3 versus 57.5 last month. The ISM version was lower than expected at 55.3 against 55.8 expectations. Construction spending also disappointed, printing just 0.1% higher against expectations of a rise of 0.5%.
– European stocks had a great day as well with the FTSE up 0.88% to 6,803, the DAX heading back toward 10,000, up 0.7% to 9,902 and even the CAC in Paris had a solid rise, up 0.86% to 4,461. Stocks in Milan rose 1.32% while those in Madrid were up 0.77%.
– The impact of the above has been that the ASX should open higher today after its 0.4% fall in physical trade yesterday. Overnight SPI 200 September futures rose 20 points to 5,359 bid. Iron Ore was up but the Australian market is doing its own thing at the moment so nothing is guaranteed. Surely it’s time for a catch up though – maybe I’ll buy on the open?
– In Asia yesterday, as noted, stocks were higher from the get-go. The Nikkei liked the Tankan survey of manufacturing along with the Nomura/JMMA PMI which printed 51.5 up 0.4 from last month. At the close, the Nikkei finished up 1.08% to 15,326. Shanghai was a bit more up and down as the Chinese manufacturing PMIs were a little, just a smidge, disappointing for some. At the close, Shanghai stocks were up just 0.08% at 2,050. There is no important data today in Asia so last night’s action will be the primary driver.
– On Bonds, US 10s rose 4 points to 2.57%, a loss of 1.48% on capital, German 10-year Bunds finished at 1.25% while 10-year Gilts rose 4 points for a similar capital loss to Treasuries, finishing at 2.71%. Locally there was no change on the 3s and 10s in overnight trade.
– On Currency markets, the dollar bloc received a lift and while the Aussie dollar was the stronger of the three, the CAD and to a lesser extent, the Kiwi, went along for the ride. The Aussie sits at 0.9492 this morning. Sterling was also higher, sitting at 1.7147 this morning and Mark Carney will be worried about the impact on growth but at least sterling’s strength will temper the need for interest rate rises. The yen lost ground yesterday as stocks rallied – or does the correlation run the other way? Euro is at 1.3678.
– On Commodity markets, Iron Ore was up $1.33 tonne to $95.00 for September delivery. September Newcastle Coal lost 30 cents though, to $71.25. Gold is at $1,326 and Silver $21.07 while Copper finished at $3.19. On the Ags, Corn fell 0.35%, Wheat fell 0.89% and Soybeans were flat.
On the data front, Australia will get the trade data for May this morning and then we see EU GDP tonight. All eyes will turn to Janet Yellen’s speech, also tonight. ADP employment is out as is the Challenger job cuts series.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
I know we’ve only had three weaker days on the stock market but in these days of low volatility and shallow corrections, it’s probably time to start getting a “potential buy” watch list together. For technical traders this means charts with interesting support not too far below current levels.
Origin may be a candidate for this. It’s now testing the support of its 40-week moving average but there’s potential to confirm a long term trend line dating back to the November 2012 low.
Depending how quickly we got there, this would intersect with at about $14. It would also pick the 38.2% retracement of the rally since the last departure from this trend line. Below that the 50% retracement and support from the March 2013 high around $13.60 may also be a candidate.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC