– The US was out for Thanksgiving but that doesn’t mean nothing happened. Crude oil tanked after OPEC decided against production cuts. This saw Nymex crude drop $4.64 a barrel for a drop of 6.3% to $69.07. As our BI US colleague Myles Udland reports, that is a dip of more than 25% in the past 50 days.
– While I’d argue that the low price is a result both of a decision to try to wipe out shale oil companies and to a lesser extent, a result of weakish global growth, we shouldn’t underestimate the potential for the massive fall in oil to have positive impacts on global growth. The fall in prices acts as a reverse tax on consumers and puts money in their pockets. This is particularly poignant for energy importing nations – like Japan – and it will also be a big boost for the US economy. But could someone please let Australian retailers know that the $1.49 a litre I saw on my way back to Port Stephens last night was a little on the high side :(
– The other big news – although it remains mere rhetoric rather than action – were these comments from ECB president Mario Draghi that the ECB is “unanimous in its commitment to use other unconventional instruments”.
“What assets? All range of assets. At this point of the discussion, the discussion is quite open. It’s been going on in several meetings.”
– So the result on European Markets – was that the DAX ripped higher again and bonds across the region rallied hard once more. Here’s the scoreboard:
- London(FTSE 100) down 0.09% to 6,723, closed weak losing 25 points in the last hour.
- Frankfurt (DAX) up 0.60% to 9,975 closing in on all-time highs and 10,000 once again.
- Paris (CAC) up 0.20% to 4382, tight range.
- Milan (FTSEMIB) up 0.82%% to 20,101, doesn’t the periphery love a good bit of free money chatter.
- Madrid (IBEX) up 0.76% to 10,728, up all day and Spanish 10’s rallied 8 points to 1.89% WOW!
– Locally, after doing nothing yesterday on the physical market, futures traders on the ASX took the Dec 2014 SPI200 contract down 17 points to 5,396.
– On Asian Markets yesterday, Shanghai ripped higher as the PBoC’s lack of repo operations, where they withdraw funds from the system, was seen as another move to ease monetary conditions. Some people reckon Shanghai has or is topping but as I’ve been writing recently, Shanghai 3000 looks a really good chance as each new high begets more buying.
- Tokyo (Nikkei Average) down 0.77% to 17,249, yen strength is weighing on sentiment.
- Hong Kong (Hang Seng Index) down 0.45% to 24,004, underperforming mainland shares
- Shanghai (Shanghai Composite Index) up 0.99% to 2,630, again it was a huge surge into the close. Again the question, is there buying from Europe?
– On Rates markets, the ECB drove a rally with German 10s down 3 to 0.66%, Italy rallied 10 points to 2.04% and Spain closed at 1.89%. In the UK, rates fell 5 points to 1.93%. Japanese bonds perhaps show the future for Europe with 10s at 0.42%.
– On Currencies, the US dollar was poised for a breakout but it never came as euro reversed off its downtrend line to be at 1.2466 this morning. GBP is at 1.57389 – similarly constrained by a downtrend and the Aussie is back at 0.8547 having found the air too thin above 86 cents overnight.
– On Commodities, Nymex crude was the big mover as noted above but copper at $2.952 tells us something about growth too. Gold can’t take a trick at $1,190 but silver dipped 2% to $16.25. Iron ore for Dec 2014 rose 24 cents to $68.41 while Newcastle coal for Dec delivery fell 50 cents to $64.70. On the Ags, it was a positive day with corn up 1.1%, soybeans up 0.72% and wheat 0.76% higher.
– On the data front, Japanese CPI will be huge today and private sector credit in Australia will be closely watched as well. German retail sales will be interesting along with EU GDP. US markets are open tonight but only for half a day and likely with a skeleton crew.
And here’s Ric Spooner from CMC Markets with the Stock to Watch
There was relief for Woolworths shareholders yesterday. The Annual General Meeting saw the company’s guidance for 4-7% profit growth this year maintained while management reported an improvement in sales over recent weeks. The stock close up by more than 2%,
Yesterday’s rally means the market has moved pretty quickly to close last week’s price gap which is encouraging.
What’s a bit concerning from a medium term chart point of view though, is that the latest downtrend looks pretty impulsive and has the hallmarks of a potential Elliot Wave style 5 swing move lower. If this scenario is correct we still have another selling leg to come in Woolies once this corrective rally is complete.
For this 5 swing scenario to remain valid, the current corrective rally will need to finish somewhere below the low labelled “1” at $33.11. Those looking to take advantage of any rally in Woolies to sell might be eyeing the 20 day moving average as well as the 50 and 61.8% retracement levels in the $32.70/33.10 zone as a possible resistance level.
Ric’s on Twitter: @ricspooner_CMC