Good morning Hawks fans. Here’s what you need to know.
– There’s going to be a lot of screen-watching this week after what was a positive end to a poor week’s trade on global stock markets. On Friday, US markets clawed back some of the losses with a rally of 167 points or 0.99% on the Dow, 1.01% on the Nasdaq, while the S&P 500 was 17 points higher at 1,983 for a gain of 0.87%.
– On the week though, the indices were lower with the Dow down 1%, the S&P off 1.4% and the Nasdaq losing 1.5%. The sawtooth pattern looks like a warning to me. Indeed, noted US fund manager John Hussman has issued a note this morning titled “The Ingredients of a Market Crash” which highlights the breakdown of what he calls “trend uniformity” – I could not agree more.
– Anyway, positive US trade led to positive European trade with the FTSE up 0.14%, the CAC up 0.91% but the DAX down 0.21%.
– Locally, the trendline we highlighted on Friday proved solid for futures traders during the day and prices climbed a little further on Friday night with the December futures up 9 points to 5,312. Traders will be titchy again, but overall it’s the direction of the S&P and Dow which will ultimately drive global and Australian sentiment.
– In Asia Friday, Shanghai was up slightly to 2,348 but the Hang Seng fell 0.38% and the Nikkei was under a little pressure again, down 0.88% to 16,230. Without anything decent by way of data today, the overall tone from the US should help Asian markets but there is also going to be a lot of focus on the student protests in Hong Kong which may pressure the Hang Seng and maybe even Shanghai a little.
– On Rates markets, the US 10s closed up 3 points to 2.53%, German 10-year Bunds stayed at 0.93% and in the UK, Gilts have slipped a little lower to 2.47%.
– On Forex markets, the US dollar was stronger across the board and the Aussie dollar’s woes continued in early Asia today. It’s trading down at 0.8756 – Friday’s lows. The yen is also weaker at 109.32 while euro at 1,2681 looks very sick. Sterling sits at 1.6239. The outlook on the week for Forex is more dependent than usual on stocks – a rally will push the USDJPY higher and pressure the Aussie but should stocks head lower, the yen should rally. Either way, the Aussie looks pressured.
– On Commodity markets, it was better night for iron ore which rallied 71 cents a tonne for December delivery. Newcastle coal was unchanged for December at $66.10 a tonne while Nymex crude rose 0.9% to $93.36. Copper was unchanged at $3.03 a pound and gold remains becalmed at $1,219 and ounce with silver at $17.64. On the Ags, wheat was flat – yes, flat! Corn fell 0.86% and soybeans dipped 0.49%.
On the data front today, there is little in our time zone before EU business and consumer confidence and climate data tonight. In the US, personal income data is important but most of the key data is released later this week.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
It looks like major bank stocks are caught up in a “sell Australia” program by some international investors which is one of the driving forces for the local share market at the moment. If you’re trying to get a bead on how much further this has to play out, here are some thoughts on potential chart support levels for Commonwealth Bank.
- The first support level on the chart below picks up resistance from mid last year. This implies a decline of about 1.5% Friday’s close. At this support CBA would be trading on a prospective dividend yield of 5.7% (8% including franking)
- The 2nd level is at around $68/70 and picks up the August and October 2013 lows plus the 38.2% retracement of the rally from $42.30. This implies a decline of about 8.5% from current levels. Here the prospective dividend yield would be 6.1% (8.7% including franking)
- The third level at around $63/$64.50 picks up the June 2013 lows and the 50% retracement. This means a further loss of about 15.5% in value and a dividend yield of 6.6% (9.4% with franking)
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC
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