– No surprise that stocks went nowhere overnight with less than 24 hours before the ECB announces its interest rate decision and markets get the world’s single most important economic release – US non-farm payrolls.
– But just because stocks can’t shake their euphoric slumber doesn’t mean that bonds and currency traders sat around. ADP private payroll data printed 281,000 in June for the biggest rise since November 2012 when the US dollar hit the euro, yen and Aussie dollars.
– Bond traders likewise took fright, with US 10-year Treasuries rising 6 basis points to 2.63%. That’s a 2.47% capital loss on the day and the US performance wasn’t the worst of it. German 10-year Bunds, which have a lower yield and thus a bigger “tic value”, rose 4 points to 1.29% for a 3.10% loss. Italian and Spanish 10s lost about 2.5% of capital while in the UK, Gilts rose 4 points to 2.75% for a loss of 1.56%.
– Bonds historically and often are the catalysts for market ructions. So watch this space.
– At the close then, the Dow was up 0.12% as it creeps toward a close above 17,000. Last night it finished at 16,976, up 20 points. The Nasdaq fell 1 point and closed at 4,458 while the S&P 500 rose 2 points for a 0.09% gain to close at 1,975.
– In Europe, stocks had a mixed session with the FTSE up 13 to 6,816 and the DAX up 9 points to 9,911 but the CAC fell 16 points to 4,445. In Milan, stocks rose 0.54% and in Madrid they were just 0.07% higher.
– Europe will be watching Mario Draghi and the ECB tonight and the presser he will be holding is due at the same time non-farms will be released a day early in the US because of the 4th of July holiday tomorrow. 10.30pm east cost time in Austalia is going to be huge tonight.
– On the ASX, get ready to ride the miners higher again with Iron Ore up strongly again and very, oh so close, to a huge break higher on a technical trading basis. Overnight, the September SPI 200 contract rose 20 points to 5432 bid. Give it another 5 to 7 points and we’ll see a break of a six-week dowmtrend – or not, as may be the case.
– In Asia yesterday, it was a great day with no catalysts except the solid rise in US markets the night before. So the Nikkei rallied 0.29% to 15,370, the Shanghai market was 0.42% higher but the Hang Seng rocketed 1.55% higher to 23,550.
– On Currency markets, as noted above, the US dollar got its mojo back from the ADP data and the euro is down a little to 1.3659. USDJPY is up at 101.76 and the Aussie, hit by the really disappointing trade data yesterday, fell further to sit at 0.9440 this morning. Only sterling, the now almighty pound, managed to resist the US dollar, rising every so slightly to 1.7163.
– On Commodity markets, Iron Ore finished up $1.58 a tonne for the September contract at $96.58 while Newcastle Coal lost 50 cents a tonne to $70.75. Gold is trying hard to break the big downtrend and at $1,329 is very close to a break which could see it gain $50 or more an ounce. Silver closed at $21.16 while Dr Copper surged to $3.26 lb which has to tell us something of what traders are thinking about the US economic recovery. Corn lost 1%, Wheat rose 0.36% and Soybeans dropped 0.54%.
On the data front, without overstating it, this is the biggest night of the year. With both the ECB meeting and a US non-farm payrolls out we have a convergence of releases which could move markets in a material way. The market is looking for around 213,000 jobs in the US and is waiting to see what the ECB will do now it has already moved to negative interest rates.
There is also a raft of Services PMIs from Markit and European retail sales. In Australia today we get retail sales and building permits.
And now from CMC Markets’ Michael McCarthy is today’s Stock of the Day
The industrial sector is this week’s quiet achiever. While consumer and financial sectors plunged Tuesday only to rally hard yesterday, the industrials crept 2.5% higher in two sessions, making them the best performers over the period. A better global manufacturing outlook has them back in vogue, and with the next major reads a month away, the sentiment shift could be positive for weeks.
This brings us to last night’s US construction spending data. Analysts expecting a 0.5% gain in May were disappointed to see 0.1%. However, it pays to read the whole story. April’s 0.2% lift was revised to 0.8% – a total rise of over 0.7% and well above expectations.
Leighton shares reacted today, breaking up through short term resistance at $20. More cautious investors may wait for a breach of $21, as there is still the potential for a 10% gain from there to the March highs above $23. However, a MACD crossing at the zero line, a clear positive impulse and a break of resistance may be enough for others.
Michael McCarthy, chief market strategist, CMC Markets
You can follow Michael on Twitter @MMcCarthy_CMC