Good morning. Here’s what happened so far.
– US data was solid overnight, highlighting the fact that the economy is on the mend and that as we approach the end of the taper in the US it won’t be long before the conversation turns to when rates will rise.
– The ISM August manufacturing PMI printed 59 against the 57 expected and the highest since March 2011. Markit’s version of the same data also beat expectations with a print of 57.9 which was the best since April 2010. Construction spending was also strong, up 1.8% in July after the 0.9% fall the previous month.
– That is pretty decent data and US 10s rose 8 basis points to 2.42% which is still super low but it was a big 3.2% capital loss. The increase in UK 10s (up 6 to 2.33%) and German Bunds (+4 to 0.93%) is harder to reckon except that as the RBA said yesterday, if the Fed starts tightening, everything changes.
– But don’t tell that to stock traders, who remain bullish. Indeed, last night our colleagues at BI US ran an article quoting Morgan Stanley analysts noting that “our best guess is that an S&P500 peak of near 3000 is possible”. That is a huge call given where the market has come from since the March 2009 lows.
– Overnight though, stocks went nowhere, with the S&P 1 point lower to 2,002, the Nasdaq up 0.39% and the Dow falling 0.18%.
– In Europe, stocks were mostly higher, with the DAX up 0.3% to 9,507, the FTSE 0.05% up while the CAC fell 0.04% to 4,378. Stocks in Milan rose 0.49% while those in Madrid were up a smidge, gaining 0.08%.
– Locally, the impact after a great day yesterday was a further 3-point gain on the September SPI 200 contract to 5,649. Iron Ore is down again and China looks like it is coming after the iron ore miners so there could be some action in that sector today.
– In Asia yesterday, the Nikkei ripped 1.24% higher as earnings rose 2.6% and the yen weakened against the US dollar to sit above 105 this morning – its highest level since December 2013. Shanghai was strong as well, up 30 points or 1.36% to 2,266. The Hang Seng was largely unchanged.
– On Currency markets, the Aussie dollar has done a stunning job holding in, all things considered. Not only did the US dollar crush the yen (105.08) and sterling (1.6467) but the RBA governor questioned China’s housing market and upped the rhetoric on the Aussie dollar level in his statement yesterday. Certainly the Aussie dollar is down more than half a cent at 0.9277 this morning, but that’s a solid performance. Elsewhere, the euro held in after recent falls and is at 1.3132 this morning.
– On Commodity markets, September Iron Ore is down $1.18 a tonne to $86.70 while Newcastle Coal fell 45 cents for the same month to$67.35 a tonne. Crude fell 2.82% to $93.25 a barrel, Gold was slammed $21 an ounce to $1,266 but Copper rallied a couple of cents to $3.16. On the Ags, Wheat fell 1.56%, Corn fell 0.27% but Soybeans rose 2.42%.
On the data front today, the Q2 GDP for Australia is out at 11.30am. The market is looking for a fairly soft outcome between 0.4% and 0.6%. We’ll also get the AiG performance of services report and RBA governor Stevens is due to speak.
Offshore, we get HSBC and Markit services PMI for China and around the world together with retail sales in Europe. In the US, we get the Redbook and New York ISM.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Apple shareholders will be relieved by news that the celebrity nude photo thieves did not hack into Apple’s iCloud or FindMyiPhone systems. Customers, however, might still be contemplating how they use the cloud if turns out that password and usernames were used by hackers.
Technically minded traders in Apple shares will also be looking at the trend line across recent trend peaks. Pushing the price through this would imply ratcheting up buying momentum. If price baulks here it might suggest profit takers are starting to move in advance of the new iPhone launch on 9 September.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC