Good morning. Here’s all you need to know so far.
– The late breaking news this morning is that the EU has finally put some decent sanctions on Russia aimed at putting pressure on President Putin’s inner circle and through them, him. The US has upped the ante as well.
– In a market sense, it just adds pressure which gives further impetus to the US dollar’s recent move higher but also increases uncertainty, which helped US stocks swoon into the close.
– The Dow finished on its low for the day off 71 points or 0.42% at 16,912. The Nasdaq fell back from its intra-day recovery and finished near the lows but down only 0.04% at 4,443. The S&P 500 finished down 0.45% at 1,970 for a fall of 9 points.
– On the data front overnight, Case Shiller price rises continued to moderate, up 9.3% year on year in May from 10.8% last. Consumer confidence was strong however, at 90.9 from 86.4 last.
– European markets were closed when the sanctions were announced and finished in the black – a situation likely to be remedied in futures trade during our day and when the markets open this afternoon Asian time. At the close, the FTSE was up 0.29%, the DAX was 0.58% and the CAC rallied 0.49%.
– On ASX Futures markets overnight, it was a decent range for the SPI 200 which traded through 5536-5561 but this morning it is at 5539 unchanged on the night. Iron ore was up again overnight, so the miners might have another good day.
– Asian stocks had another solid day yesterday with the Nikkei up 0.57% as the USDJPY rallied (yen weakness), closing at 15,618. The Hang Seng rose 0.87% and in Shanghai, stocks rose 0.23% to 2,183.
– Bonds rallied across the board with US 10s down 3 points to 2.46%. German 10-year Bunds also rallied 3 points to 1.12% with Gilts down a similar amount to 2.55%. Locally on the SFE, 3-year bond futures were 4 points higher at 97.35 (2.65%) while the 10s were 4.5 points higher to 96.575 (3.425%).
– On Currency markets, it is all about the US dollar and its strength as the Euro makes new lows for 2014 at 1.3402 – it is a little higher at 1.3409 at the moment. Sterling continues to unwind recent strength and is at 1.6943 this morning while the jump in the Japanese unemployment rate (even if just to 3.7%), along with the lower than expected rise in retail trade in June of 0.4%, put the yen under pressure. USDJPY is back above 102 at 102.09 this morning. The Aussie is drifting lower on the back of US dollar strength but holding in well at 0.9385.
– On Commodity markets, Iron Ore September 62% Fe swaps rose 62 cents to $95.75 tonne while Newcastle Coal also rallied, although by the tiny margin of just 5 cents, with the September futures, settling at $70.35 tonne. August Nymex Crude fell another 77 cents to $100.90 Bbl while Gold sits at $1,310 oz with Silver at $20.58. Copper was 2 cents lower at $3.21 lb while the Ags were at it again with big falls. Wheat dropped 2.76%, Corn fell 1.70% and Soybeans were 0.81% lower.
The next 24 hours are huge for markets with the release of the advance estimate of US Q2 GDP and the announcement of the FOMC’s decision. These data – in the lead-up to non-farms on Friday – will either reinforce or deny recent moves in the US dollar, bond and stock markets. Their import cannot be understated.
Elsewhere, CPI in Germany is also a huge number for the Euro and expectations about what the ECB might do and of course, further discussion about Russian sanctions and their impact will be of interest to traders.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Yesterday’s news of QBE’s increased claims provision for in Latin American saw the share price returning to test chart support levels for the 4th time since early 2012. This support is around $9.88- $10.30.
Nervous investors and potential bargain hunters will now be interested to see if price shows any signs of forming a base around these levels or just keeps falling straight through the support in a sign of weakness. In these circumstances it can pay to allow for a bit of tolerance in defining the support level, allowing for the possibility of a small false break below it.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC