Today’s update has some big competition for the headline news overnight – Twitter IPO, ECB rate cut and stronger than expected US GDP.
– In the end though, it has to be the fact that the S&P 500 is reversing, and very sharply, as the key news event for the day because for all the hype this is still the global bellwether market and has the biggest impact in our time zone today. Overnight the S&P 500 traded up to a high of 1775, but for the last eight hours it has been in a relentless decline and currently sits at 1747, down 23 points or 1.33% on the day.
– Clearly the 2.8% annualised growth rate for GDP has reinforced recent data suggesting the US shutdown really had a limited effect on sentiment and the US economy entered this quarter with stronger momentum than many thought probable or possible. So Dectaper may be on the table, even though 2014 seems a better bet. The Dow closed down 152 points or 0.96% at 15,595. The Nasdaq is off 1.91% at 3,857.
– In Europe, stocks opened in the red, spiked on the ECB rate cut to 0.25% and then fell heavily. The FTSE fell 45 points or 0.66% to 6697 and the DAX somehow rose 0.44%. In Paris, the CAC fell 0.14%, while in Milan the FTSEMIB fell 2.07%. The IBEX in Spain dropped 0.99%.
– Closer to home, on the Sydney Futures Exchange the December SPI 200 contract is down 27 points at 5400 bid. Support has been strong each time the ASX and the SPI has dropped over the last week and today is going to be a big test for the bulls with a break lower likely. On the bond boards, the 3’s are up 3 points and the 10’s rose by the same amount, reflecting a fall in US 10-year Treasuries of 4 points. Bunds and Gilts fell 5 points each.
– The ECB surprised everyone except our US colleague Matthew Boesler (@boes_) who wrote a great piece yesterday on a possible cut. The ECB’s move to 0.25% and the comment that the rate would “remain at present or lower levels for an extended period of time” hit the euro super hard and it fell to a low of 1.3295, before a solid bounce to 1.3427 for a loss of only 0.63% on the day. Importantly, from a technical perspective, Euro fell down through and has failed at a retest of the 5-month trendline.
– In other FX markets the Aussie tried to rally, making a high of 0.9529 but sits at 0.9445 right on 3-month support and looking like it is going to break lower. Sterling is roughly unchanged at 1.6085 and USDJPY is down 0.79% to 97.87 but off the low of 97.63.
– On commodity markets, Bitcoin made a new all-time high at 324.20 before falling back to 299.45 this morning. It’s rally over the past few weeks has been ludicrous, and while in some quarters this reinforces that it is becoming a genuine medium of exchange price, swings like this and a lack of real hedging market are big barriers for the moment. In other commodities – I’m saying Bitcoin is a commodity because it can be mined, I can’t create Aussie dollars by digging them up – Nymex Crude was 0.56% lower to $94.27, Gold fell 0.71% to $1305 and Copper was up 1 cents to $3.25 lb. On the Ags, Corn fell 0.3% and is at 1-year lows, Wheat is up 0.11% and Soybeans rallied 1.25%.
On the data front, over the next 24 hours we have Chinese trade data, German trade tonight, French industrial production and UK trade, before the big one – US non-farm payrolls. After last night, if the number is bigger than the 125,000 expected, the US dollar is going to roar, Euro and Aussie will get hit and stocks are likely to get smashed.
So watch out at 12.30am (AEDT) tomorrow.