Good morning. Here’s your quick catch-up on all that’s gone on.
– If you look at the moves in the US on a close-on-close basis, nothing much happened. But, like everything, take a peek under the covers and there are signs something is not as perfect in this market near all-times highs as it should be.
– US 10-year Treasuries still below 2.5% is a signal, as are German bonds at 1.15%, and maybe even the rally in Spanish bonds is telling us something about what money is doing. But Westpac’s Graeme Jarvis perhaps put it best when he highlighted that the high yield bond market is under pressure recently, noting “It started in derivatives first then moved onto secondary before finally resulting in a couple of deals being pulled last week.” It’s not positive price action.
– Anyway, that’s a trend that may be emerging and is worth watching but at the close this morning, the Dow is up just 0.13% to 16,983, the Nasdaq was 0.10% lower at 4,445 while the S&P recovered from a low at 1,967 to finish up 1 point at 1,979.
– Datawise in the US, the Markit Services PMI printed 60.9 against 59.8 while the composite index stayed at 61. Pending home sales had a surprise fall of 1.1% in June while the Dallas Fed Index rose to 12.4.
– In Europe, the FTSE was down just 0.05% to 6,788, the DAX lost 0.48% but the CAC rose 0.33%. The divergent moves continued with Milanese shares falling 0.59% while stocks in Madrid fell just 0.07%.
– The impact on the ASX is that the SPI 200 September futures contract is off 7 points to 5521 after a flat start to the week (although a solid recovery from the low) on the physical market which closed yesterday at 5,577. Perhaps today we’ll see a better performance given the big bounce in iron ore and coal overnight – perhaps.
– In Asia yesterday, the Shanghai composite ripped higher, up 51 points or 2.42% at 2,178, after positive comments from officials about the growth outlook. The Shanghai market is now at levels not seen since mid-December 2013. The Nikkei was up 0.46% to 15,529.
– On Currency markets, the Aussie is a little better bid at 0.9404 but it has been a very quiet night on FX markets. Euro is at 1.3438, sterling is at 1.6981 and USDJPY is at 101.84.
– On Commodity markets, Iron Ore bounced again, rising $1.13 tonne to $95.13 while September Coal just had a huge bounce, rising $1.45 tonne to $70.30 tonne – the highest level since earlier this month. Nymex August Crude fell 46 cents Bbl to $101.63, Gold is at $1,305 oz while Silver sits at $20.53. Copper was unchanged while the Ags were mixed with Ccorn up 1.31%, Wheat fell 0.6% and Soybeans jumped 2%.
On the data front today, we get HIA new home sales in Australia before German import and export prices tonight along with UK mortgage approvals and consumer credit. In the US, it’s the Redbook index, Case Shiller house price index and consumer confidence
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
NAB or CBA
This has been a key question for share market investors. It hasn’t been simply a matter of piling into any bank. As the chart below shows, a share in NAB bought about 70% of a CBA share when bank stocks reached their darkest hour after the GFC. Today a NAB share will buy only 42% of a CBA share. Put another way, CBA shares have rallied 241% from their 2009 low while NAB is up a mere 72%.
Although not the only factor, NAB’s ownership of UK banks has been a major contributor to this difference. While recognizing that the UK assets were a problem, NAB chose not to quit at fire sale prices, instead waiting for the UK economy and property markets to recover. For some, this has been a controversial strategy but yesterday saw another step along the way. NAB announced it has been able to sell down another $A1.1bn of its UK commercial real estate portfolio. If the UK continues to improve and Australian business lending starts to pick up, investors might start to find a different answer to the Which Bank question.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC