TGIF. But first:
– It was an awful night on European stock markets with ECB boss Mario Draghi showing that he remains either unwilling, or unable because of objections within his board, to take the next step toward quantitative easing. BI US colleague Myles Udland wrote this morning that “Draghi didn’t give the amount of detail regarding the ECB’s asset-backed security purchase program that the market was expecting. Draghi didn’t give any detail as to the size of the potential asset purchases from the ECB, and European stocks paid the price.”
– Indeed they did – stocks in Milan dropped 3.92%, in Madrid they fell 3.12% and on the CAC in Paris they were 2.80% lower to 4,243. The DAX in Frankfurt dropped 1.98% to 9,196 and even UK stocks fell, with the FTSE off 1.7% to 6,446.
– Confirming the disquiet in European markets, Italian and Spanish bonds sold off, rising 4 and 5 points respectively, although German 10-year Bunds were steady at 0.86%.
– In the US, the European pain hurt early but the market recovered from around lunchtime and by the close, US stocks were flat. The Dow finished down 0.02% to 16,801, the Nasdaq was up 0.18% to 4,430 while the S&P 500 was flat at 1,946, 20 points higher than the low at 1,926!
– On the data front, the jobless claims fall to 287,000 last week was better than expected and the recent trend could suggest a very solid result for non-farm payrolls tonight in the US.
– Interestingly, in the context of the US recovery from the lows, the local market had a shocker in overnight futures trade with the December SPI 200 down 19 points to 5,262 bid. Iron ore was a bit better bid overnight and the banks are attractive for yield hunters, so maybe things might be better than expected by futures traders. In the end though, it all depends on non-farms tonight.
– In Asia yesterday, the carnage was terrible across the bourses of the region. The Nikkei dropped 2.61% to 15,662, the Hang Seng was 1.28% lower to 22,933 while Shanghai was a little higher, up 0.27% to 2,364. Markets will be focused today on Chinese and Japanese services PMI.
– On Currency markets, the US dollar continues to reverse its recent strength. Draghi’s lack of articulation of his QE plans sees euro up at 1.2674. USDJPY is down at 108.35 and looking close to a huge move lower on the technicals. The Aussie has rallied back to 88 cents and GBP is at 1.6151.
– On Commodity markets, iron ore December futures rose 31 cents to $79.19 a tonne while Newcastle coal for the same month was 75 cents higher at $66.30 tonne. Elsewhere, crude staged a big recovery from below $90 a barrel at one point to finish up 0.73% to $91.39. Copper is just hanging on to $3 down 1% while gold is at $1,214. On the Ags, wheat is up 0.96%, corn is up 0.44% and soybeans are 1.11% higher.
On the data front, it is Services PMI day around the world which is important with China, Japan and the AiG. Performance of Services Index is the key in Asia before we head to Europe for the releases across the continent. But it is all secondary to non-farm payrolls tonight in the US. The market is expecting an up-tick from last month’s weak 142,000 to 215,000.
Have a great weekend and Go the Dogs!
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Here’s a situation that’s likely to interest members of the Fibonacci fan club.
The downtrend that began with the July peak at $5.03 has so far taken the classic Elliot, 5 wave structure. In these circumstances it’s not unusual for the 5th and final swing lower to be about 61.8% of the length of the move down from 0 to 3 (61.8% being the Fibonacci “golden number”).
Fortescue has now arrived at this area and is showing signs of basing. The last 3 days have seen a Japanese candlestick basing pattern called a Tweezer (lows at the same level).However; it pays to wait for signs that these Fibonacci levels are being rejected before attaching too much significance to them. From here a close above yesterday’s high would start to look like rejection. This would in turn set up for a correction of the whole 5 wave decline. Alternatively, FMG could drift a little lower and still form a base around this 61.8% level.
Presumably we will only get a significant corrective rally in Fortescue if the much awaited seasonal bounce in iron ore prices gets under way. That would have significant implications for the Aussie Dollar and the whole atmospherics of the Aussie share market.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC