– Janet Yellen already has the gravitas that her two predecessors, Messrs Greenspan and Bernanke, earned over many years and her testimony last night to the US Senate, which was postponed due to the weather a couple of weeks back, gave the market the sense that the Yellen Fed would be a continuation of the Bernanke Fed.
– The key for markets, as CommSec’s Craig James put it this morning in a note to clients, was that “the tone was more dovish than commentary provided two weeks ago. Yellen said the Fed would be on alert to make sure recent economic weakness was due to cold weather than a fundamental slowdown.” That provided a lift to stocks.
– So with 40 minutes to go before the close, the Dow is up 0.42%, the Nasdaq up 0.58% and the S&P is currently on track for a new closing high, up 8 points to 1,853 for a gain of 0.42%.
– In Europe, stocks were down – until Yellen’s address – having been hit by weaker than expected Spanish GDP (+0.2%), German unemployment stuck at 6.8% and low German CPI, which printed at 0.5%, slightly lower than expected. At the close, the FTSE managed a small rally up 0.12% but continental stocks were lower with the DAX down 0.76%, the CAC barely changed down 0.02% and stocks in Milan and Madrid down 0.38% and 0.59% respectively.
– Locally on the ASX overnight, the SPI 200 March Futures contract is up 16 points to 5412 bid.
– On global FX markets, the Aussie has bounced nicely from a test of 89 cents in early European trade overnight to 0.8960 this morning, down ever so slightly day on day. While not an Aussie-specific bounce, it was dragged higher by US dollar losses against the pound and euro, the Aussie’s performance was solid and reinforces the box it has been trading in recently. Euro is back at 1.3713 off a low of 1.3641 while GBP is at 1.6687 off a low of 1.6615. USDJPY has regained 102 this morning and sits at 102.07. These lockstep correlations are a worry.
– On commodity markets, Gold is largely unchanged on the day at $1228 oz, Nymex Crude is down 0.28% to $102.30 Bbl and Copper is at $3.24 lb. On the Ags, Corn lost 1.65%, Wheat a massive 2.96% and Soybeans fell 0.98%.
On the data front, it is a big day for Asia with the South Korean manufacturing BSI out along with industrial and service sector production. In Japan we get unemployment, housing starts and CPI, while in Australia, private sector credit is released.
Tonight is pretty big too, with the release of German retail sales, French consumer spending, Italian CPI and the more important EU-wide CPI, which will give a strong lead to what Mario Draghi and his ECB colleagues will do with monetary policy next month and whether they will embark on the QE path.
In the US we get the next read of GDP for Q4.
And here is Ric Spooner of CMC Markets Stock to watch today.
Despite a big move in response to yesterday’s profit and restructure announcement, the Qantas chart continues to behave in text book fashion. This might create some useful indicators for traders.
After rising neatly to the resistance of the 200 day moving average prior to the announcement on Wednesday, the disappointment that followed it saw this resistance rejected. The market was well aware though, that details of the government support package for Qantas are still to come. Yesterday, traders were not prepared to take price below the support of the 20 day moving average and 38.2% Fibonacci retracement level.
The 20 and 200 day moving averages might now become useful support and resistance indicators for Qantas. It’s not unusual for the first leg down in a correction to bounce off the 38.2% level but a drift through this support zone would begin to look like a deeper correction is in store (even if a bit of zigging and zagging is involved on the way down).
Ric Spooner – Chief Market Analyst CMC Markets
You can follow Ric on Twitter at @ricspooner_CMC