Welcome to Friday. Stay focused.
– Last night was a night on markets which showed the power of free money and zero interest rates on volatility. In the pre-GFC world, if Russia appeared to have quietly “invaded” Ukraine and US Q2 GDP was revised up to a stellar 4.2%, these two events on the same night would have seen stocks sell off, the US dollar roar and most likely US yields rise as the focus on tightening renewed. Not last night, not in this new world of free love and free cash. This is a powerful message to traders, from traders – don’t worry. At least not till we start worrying.
– So at the close, the Dow was down just 0.25% to 17,080, the Nasdaq fell a similar amount to 4,558 and the S&P was even quieter, off just 0.16% to 1,997.
– The data in the US, as noted with the GDP, was solid but jobless claims printed 298,000 which was a good result as well. Pending home sales rising 3.3% was also an indication of an economy on the mend. The time until the Fed starts to raise rates looks like it is shortening.
– In Europe, stocks had a weaker performance than in the US but on the face of it did reasonably well, all things considered. Eyes are clearly on Draghi next week and the chance of QE rather than Russian troops spending their “holiday” in Ukraine.
– At the close, the FTSE was 0.36% lower at 6,806, the DAX fell 1.12% to 9,463, the CAC dropped 0.67% while stocks in Milan and Madrid were 2.03% and 1.06% lower respectively.
– Locally, the impact was that the SPI 200 September futures fell 5 points in overnight trade to 5603. Iron Ore fell again overnight which will keep the pressure on the miners again today.
– In Asia yesterday, for me the big news was the break below 2000 on the Shanghai B index which fell 13 points or 0.61% to 2,196. This index has now had a big reversal from 1-year highs recently and a big technical break which will suggest to those who trade it that lower levels beckon. Watch this market for a possible lead on developed markets. The Nikkei was down 0.48% to 15,460 and the Hang Seng dipped 0.71% to 24,471.
– Bonds had an interesting performance in the US with a fall of 2 pips to 2.34%. Ukraine trumps GDP it seems. German 10s made another new low at 0.89% and Gilts were unchanged at 2.26%. But perhaps the sell-off in Italian and Spanish 10-years which rose 7 and 8 points respectively is a slight indication that risk might, just might, be about to go off.
– But if it was, the Aussie dollar wouldn’t be at 0.9357 and gold wouldn’t still be below $1300 at $1,288 an ounce. Free money and QE is a dangerous dampener on reality – until it bites perhaps.
– In other Forex markets, the euro traded up to a high around 1.3120 but has weakened now to 1.3183 this morning. Sterling is at 1.6587 and USDJPY sits at 103.71.
– Iron Ore is lower again, off 46 cents to $87.46 a tonne on the September futures. Newcastle Coal for the same month was up 15 cents to $69.45. Nymex Crude is up 67 cents a barrel to $94.57, Copper is down at $3.13 a pound. On the Ags, Corn is up 1.21%, Wheat rose 1.96% and Soybeans were up 1.79%.
On the data front today, Japanese CPI and unemployment will be big and Australian private sector credit will hold some interest in Australia, but only some. EU CPI tonight is a big release, as is US consumer consumption data.
Enjoy your weekend because next week is chockablock with data, central bank meetings, other trading catalysts and non-farm payrolls to end the week.
I can’t wait.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Yesterday’s profit announcement did the trick. Not only did Qantas close up 7% but it broke through a chart trend line that’s been in place for nearly 4 years.
This trend line now has the potential to be a support area for the share price if we see future bouts of nervousness.
The June high at $1.43 is the most obvious near term resistance but there’s not too much in the way of major chart resistance before the high $1.70s (perhaps we should not get too far ahead of ourselves though – this is Qantas we’re talking about).
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC