Here's your 20-second guide to what Aussie traders will be talking about this morning

Stocks and the US dollar surge (Getty/Joe Raedle)

– It was a huge night for stocks with a sea of green across global bourses. The move ignited from the get go in Shanghai yesterday after the PBOC Governor’s comments on Sunday implied more stimulus has to come. That seems to have combined with pharmaceutical M&A news on both sides of the Atlantic and what looks very much like a pre-quarter end drive to push prices higher. In the end we have gains of 1% or more in most of the major markets. The ASX futures have had a solid lift, up 49 points to 5,898.

– It’s also been a big night for currency traders as the US dollar bulls have once again taken the ascendancy. The Aussie dollar has been crushed and has lost around 1.4% to 0.7640. That’s 3 full cents below last week’s high. I’ve explained why here. The weakness is Aussie-specific because the Euro, CAD and Pound are all just 0.6% weaker this morning.

– One thing worth noting overnight is that while US personal income data showed a rise of 0.4% in February (0.3% expected), consumption was up just 0.1% (0.2% expected). This suggests further savings by households which is not the action of a rampant economy. The reason I mention this is because Janet Yellen and her colleagues have essentially guaranteed they are going to hike rates this year and have also said that the moves higher will not be a linear progression. That’s important in the context that Joe LaVorgna from Deutsche Bank US has slashed his GDP forecast for Q1 2014 to just 1.7% from 2.4%. Likewise, the Dallas Fed has said things are getting pretty dire in the Texas economy.

Here’s the overnight scoreboard:

  • Dow Jones up 1.49% to 17,976
  • Nasdaq up 1.15% to 4,947
  • S&P up 1.22% to 2,086
  • London (FTSE 100) up 0.53% to 6,891
  • Frankfurt (DAX) up 1.83% to 12,086
  • Paris (CAC) up 0.98% to 5,083
  • Tokyo (Nikkei) up 0.65% to 19,411
  • Shanghai (Composite) up 2.62% to 3,787
  • Hong Kong (Hang Seng) up 1.51% to 24,855
  • ASX Futures (SPI June) up 49 points to 5,898
  • AUDUSD: 0.7650
  • EURUSD: 1.0830
  • USDJPY: 120.09
  • GBPUSD: 1.4801
  • USDCAD: 1.2684
  • Crude: $48.69
  • Gold: $1,185

– The local market is set for a good day today based on the solid, almost 50-point, rise in the SPI 200 futures overnight. That comes in the wake of yesterday’s crushing loss and could be challenged by the continued fall in iron ore and the impact this could have on the miners. It’s the last day of the quarter though so I’m more loathe than normal to make predictions about the ASX.

– Shanghai stocks ripped higher yesterday on hopes of further stimulus and a plan for a new Silk Road trade route articulated by Premier Li over the weekend. I confess to having completely missed this but Reuters reports:

President Xi Jinping said he hoped its annual trade with the countries involved in Beijing’s plan to create a modern Silk Road would surpass $2.5 trillion in a decade… Under the so-called “One Belt, One Road” initiative, China aims to create a modern Silk Road Economic Belt and a 21st Century Maritime Silk Road to boost trade and extend its global influence. Commerce Minister Gao Hucheng said previously that more than 50 countries had shown interest in the initiative.

You can read the full story here. But the key is that it is just another initiative undertaken to ensure Chinese growth can be sustained. However, it’s worth noting that even though Shanghai is ripping higher on hopes of stimulus, the PBOC Governor’s comments on the weekend are an admission that the economy is weaker than anticipated. Linnette Lopez from BI US summed things up nicely with her piece entitled ‘The Chinese government finally admitted things aren’t going so well’.

– On commodity markets gold has fallen again under the weight of the stock rally and the US dollar surge. It’s at $1,185 an ounce this morning. Crude is down 0.41% to $48.67 while copper is up 0.45% to $2.79 a pound. On the bulks, iron ore has made another new low for this run which will keep the Aussie under pressure. June iron ore futures fell 53 cents a tonne to $51.46. Newcastle coal for the same delivery fell 80 cents to $55.80 a tonne.

On the data front today we’ll have ANZ Roy Morgan weekly consumer confidence at 9.30 AEDT, HIA new home sales at 11am and the credit at 11.30 AEDT. Japan will release vehicles and housing starts data while in Germany tonight we get retail sales and unemployment. In the UK there’s Q4 GDP and then the EU-wide CPI. In the US tonight the Case Shiller house index will be interesting, as will Chicago PMI and the consumer confidence data.

And now from CMC Markets’ Ric Spooner is today’s Stock of the Day:

Dick Smith Holdings

Dick Smith recently announced a restructure that’s designed to improve efficiencies but will incur one off cash costs of around $7m. At the same time it re-affirmed its guidance for earnings per share growth in the range of 3-5%, excluding these costs.

After a recent sell off Dick Smith is trading at a pretty undemanding valuation of 9 times forecast earnings for F16. It’s also arrived at an interesting chart level. At around current levels, the latest swing lower will be the same time as the previous one. This is the AB=CD pattern often seen in charts. Signs of the stock starting to form a base around current levels would set up for a recovery.

If the stock doesn’t stop falling here, around $1.84 will be another level to watch. At that price, the CD leg will be 1.27 times AB, a Fibonacci ratio also often seen in charts.

Ric Spooner, chief market analyst, CMC Markets.

You can follow Ric on Twitter @ricspooner_CMC

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