Good morning. Here’s what’s happened so far.
– Oil is the big news again overnight with Nymex up 3%, after the more than 7% rally Friday night. What’s fueling the rally is that news out of the US continues to highlight a supply response from the crash in prices out of US oil producers, with wells being closed and less capital spending to build production.
– Elsewhere, Wall Street has been jogging on the spot with a bit of up and down after some weaker than expected, but not terrible, economic reports from the US. Personal spending dipped 0.3% in December against -0.2% expected, construction spending rose just 0.4% against 0.7% expected and ISM manufacturing dipped from 55.5 to 53.5 below the 54.5 expected. It all highlights the import of non-farm payrolls Friday for setting the tone on US growth for the next month.
– On the earnings front, it’s worth noting, particularly with the S&P clinging to important support again overnight, that Goldman Sachs’ equity strategy team has sent a report to clients which noted that “over the 34 quarters the firm has tracked guidance, there have never been more companies guiding below consensus expectations”. Myles Udland from BI US has the details here.
– But at the close, the scoreboard in the US reads in the black after rallying hard in the last hour
- Dow Jones up 1.14% after a solid rally into the close to 17,361
- Nasdaq up 0.9%, 42 points to 4,677
- S&P up 1.3%, 26 points for a huge rally off the low of 1,981 to close at 2,021
– European markets were rescued by the Greek Prime Minister saying he wasn’t going to Russia for aid and he didn’t want a “Grexit”. Economic data, in the form of manufacturing PMIs, was better than expected in Spain and Italy but a little weaker in France and Germany.
At the close:
- London(FTSE 100) up 0.5%, 34 points to 6,783
- Frankfurt (DAX) up 1.25%, 134 points to 10,828
- Paris (CAC) up 0.52%, 24 points to 4,628
- Milan (FTSEMIB) down 0.08%, 17 points to 20,486
- Madrid (IBEX) down 0.72%, 75 points to 10,328
– Locally, you have to marvel at the performance of the local ASX market which didn’t seem to be able to take a trick a while back. Yesterday, it rallied for the 8th session in a row. Overnight March 200 futures are up 24 points to 5,592.
– In Asia yesterday, Shanghai’s woes continued. This time the weakness was sourced in the release of the weaker than expected NBS and HSBC PMIs, which highlighted the economy does appear to be slowing again. Equally troubling was news of a corruption probe into the President of China’s largest private lender, China Minsheng banking Corp. President Xi is serious and that is a massive headwind for a very frothy Shanghai stock market.
– The close in Shanghai at 3,128 was down 82 points on the day before bringing the 5-day decline to 7.54% and taking prices very close to the 1 month low of 3,095. Elsewhere in Asia, the Nikkei was down 0.66% to 17,558 and in Hong Kong, prices dipped 0.09% to 24,485.
– Rates markets saw a small sell-off across developed markets with US 10s up 3 points to 1.67%, 10-year Bunds in Germany remained at 0.27% while Gilts in the UK rose 4 points to 1.38%. Amazing rates really, so far into the post-GFC world. Noureil Roubini wrote a great article on the topic of free money, QE and inflation.
– On currency markets, forex traders gave the US dollar a bit of a knock with the commodity block doing better overnight. This lifted the Aussie dollar back above 78 cents at 0.7805 this morning. Euro is at 1.1336 while sterling is at 1.5019. USDJPY has recovered a little in the past hour and is at 17.47.
– On commodity markets, Nymex crude is up 3% to $49.73 a barrel, gold is down a smidge to $1,274 and copper is largely unchanged at $2.4995 a pound. On the Bulks coal is up $1.07 a tonne to $62 having broken a six month downtrend while iron ore for March rose 51 cents to $61.58.
– On the data front, does anything else really matter today except the RBA? Probably not and it would be very strange – given the time and changed global circumstances since the last meeting – for the governor’s statement not to be different. That means even if they don’t cut, they may signal one is in the offing. Australia also gets the release of building permits and trade data this morning, while tonight we see the release of Italian CPI, factory orders in the US and the IBD/TIPP optimism index.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
JB Hi Fi
There was relief for JB Hi-Fi’s shareholders yesterday with news that it achieved a lift in sales during January. Same store sales were up 7% on January last year. This puts to rest market jitters over declining sales in the middle of the year and reinforces the operational capabilities of JBH’s management.
The share price had a wild ride after release of this news. At one stage it was up 6% but in the event finished up a creditable 1.8% at $17.05.
The top end of yesterday’s price range ran into significant technical resistance at around $17.80/$18.00. This level could easily be a ceiling for JBH for a while. Chart resistance here includes:
• The previous support line of a well-established triangle formation
• 61.8% Fibonacci retracement of the last major decline
• Potentially completes an ABCD formation where CD is 1.27 times the length of AB
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC