Here's your 20-second guide to what Aussie traders will be talking about this morning

Mmmm, US dollar! (Getty/Spencer Platt)

Good morning

– The big news of the past 24 hours has been the decision by Saudi Arabia to intervene in Yemen. The Saudi’s announced yesterday they were forming a coalition of 10 nations to bomb the Houthi’s. They have since followed up on the plan. This morning a Saudi official did not rule out ground troops at a press conference. The Saudi actions are exactly the type of geo-political tension investors have been worried about this year and one analyst believes we could be seeing the ‘redesign’ of the Middle East. Crude is up 4.35% at $51.35 a barrel as a result of these actions. That’s below the high of the day of $52.48 but well up on the $48.73 low.

– Stocks haven’t liked the increased geo-political tensions with every single index I watch in Europe and the Americas in the red this morning. For the most part they are not big falls — a few 10th’s of a percentage point here and there — but that’s after some decent falls earlier in the day. After the previous day’s falls and the recent record run — all over the world — there is a growing feeling that perhaps much is priced into stocks. In case you missed it yesterday here is David Rosenberg’s 4 big obstacles facing the stock market.

– On forex markets it was a huge night. The US dollar was really weak at one point before completely reversing course and ending stronger on the day. Initially it was risk aversion after the Saudi and crude oil move which saw the Yen strengthen in Asia. Traders in Europe then joined in the US dollar selling. This saw the Euro rally up to 1.1050 and Sterling hit 1.4995 after German consumer confidence hit a 14-year high. But this morning the US dollar has more than reversed its losses with the Euro and GBP substantially lower and the Yen back where it was yesterday afternoon. Westpac’s Imre Spiezer says in his morning note that the reversal came under “the weight of persistent sales tripped stops below 1.10 and 1.09. USD gains were helped along by better than expected updates on jobless claims as well as Markit’s Services PMI and related to that, a steady (rise) in US yields.” The Aussie had a less volatile time of it and sits at 0.7817 this morning.

Here’s the overnight scoreboard:

  • Dow Jones down 0.23% to 17,678
  • Nasdaq down 0.27% to 4,863
  • S&P down 0.21% to 2,056
  • London (FTSE 100) down 1.37% to 6,895
  • Frankfurt (DAX) down 0.18% to 11,843
  • Paris (CAC) down 0.29% to 5,006
  • Tokyo (Nikkei) down 1.39% to 19,471
  • Shanghai (Composite) up 0.59% to 3,682
  • Hong Kong (Hang Seng) down 0.13% to 24,497
  • ASX Futures (SPI June) up 2 to 5,885
  • AUDUSD: 0.7824
  • EURUSD: 1.0885
  • USDJPY: 119.18
  • GBPUSD: 1.4846
  • USDCAD: 1.2470
  • Crude: $51.24
  • Gold: $1,204

– In Asia yesterday Shanghai was the beneficiary of another PBOC easing with CNY 25 billion being placed into the market by the PBOC via reverse repos. That enabled the market to rally when all else are down around the globe. It’s a continuation of the stimulus-driven rally in China. In Tokyo traders didn’t like the big run in the Yen or the geo-political tensions emanating from the Middle East. Today, however, the release of Japanese CPI will be the big driver.

– On rates markets there was another poorly received US Treasury auction which helped knock rates higher again. US 10’s finished the day up 7 at 2%. Part of that is that St. Louis Fed President James Bullard is still aggressively talking about rate hikes. Reuters reports Bullard told an audience in Frankfurt that rates need to start normalising “so that it (monetary policy) is set appropriately for an improving economy over the next two years.” UK 10’s finished at 1.62% up 11 points after retails sales smashed expectations with a rise of 0.7% versus the 0.4% expected. In Germany bunds closed at 0.19%.

– On commodity markets besides the move in crude gold continues to grind higher up another $9 overnight to $1,204. Copper is at $2.82 a pound. On the bulks, June iron ore dipped 47 cents to $52.83 while for the same delivery Newcastle coal finished at $55.85.

On the data front today Japanese CPI is big. Tonight we here from BoE Governor Mark Carney in a speech which will be important for UK rates and the Pound. In the US we round out the week with the third read of Q4 2014 GDP which is expected to print an annualised 2.4%.

And now from CMC Markets’ Ric Spooner is today’s Stock of the Day:

Seek Limited

I featured Seek as my stock to watch a few weeks ago and talked about the potential to buy if there is a retreat to support between about $16.50 and $17.00.

If you think Australia is merely going to endure a rough patch as opposed to falling into a recession, then the economy should generate enough job growth to make Seek decent value around these levels.

So far Seek has not obliged by selling off into this support zone but this remains a possibility. The support consists of the bottom of a trend channel and the 200 day moving average around $17.00. Below that a horizontal line of best fit through past support and resistance levels creates potential support at around $16.70.

Ric Spooner, chief market analyst, CMC Markets.

You can follow Ric on Twitter @ricspooner_CMC

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