– An interesting response to the post-non farm payrolls spike in the US dollar and markets in the past 24 hours, with stocks unable to kick on, and the US dollar suffering a solid reversal from the moment that Asia handed the baton to European traders.
– Indeed the truly remarkable thing about the US dollars fall overnight is that yesterday both the Japanese Finance Minister, Aso, and Prime Minister, Abe, seemed to imply that the Yen was not overly weak at the moment. At the same time German factory data tanked with the August release falling 5.7% – weaker than the already dismal prediction of a fall of 2.5% and a big shift from the 4.9% rise the previous month.
– So the Yen and Euro were stronger taking the Aussie dollar with them which suggests a lot of love and good news are already built into the US dollar. Positioning is as important as fundamentals in trader markets sometimes.
– Turning to stocks overnight and at the end of trade in the US the Dow and S&P 500 were only off a little down 0.1% to 16,992 and -0.15% to 1,965 respectively. Early strength on the back of a solid lead from Europe gave way pretty quickly before the big indices recovered. The Nasdaq followed a similar path but was unable to claw closer to home with a fall of 0.46% to 4,455.
– Europe’s stock market rally was a difficult one to fathom other than catch up to the US moves on Friday night which the price action of opening highs and then sell off over the day seems to confirm. At the close the FTSE 100 fell 0.55% to 6,564, the DAX dipped 0.16% to 9,210 and the CAC closed at 4,287. In Madrid stocks were 0.74% higher while in Milan stocks fell 0.4%.
– Locally December SPI 200 futures rose 20 points to 5,296 but with copper up a few cents, iron ore back above $79 a tonne, gold up from the cycle lows of Friday and agricultural commodities stronger might help the market today.
– In Asia the Nikkei just loves talk of a weaker yen and above 109 yesterday it shot 1.16% higher to 15,891. The Hang Seng, where the protests seem to be losing momentum, was up 1.09% to 23,315. Shanghai should open around 2,364 but without a major catalyst Chinese trade should be fairly quiet. In Japan however, the the BoJ monetary policy decision announcement will be key to both the yen and the Nikkei.
– On bond markets German 10’s are at 0.87% – and why not after that terrible factory order data – while US 10 year Treasuries are at 2.42% while UK Gilts closed at 2.36%.
– On currency markets the US dollar ran into a wall once again with the Yen up near 110 and the Aussie dollar down below 87 cents. Add to the rallies in these two currencies the strength in gold, Sterling and the Euro and we get a sense that the US dollar has run its course and is in consolidation mode. How long or how far the rallies stretch is problematic but a consolidation appears likely.
– This morning the levels of the big 4 are Euro at 1.2652, Yen at 108.75 – which is phenomenal all things considered – GBP at 1.6076 and the Aussie is back at 0.8761.
– On commodities iron ore closed at $79.04 a tonne. Newcastle coal for December fell 15 cents to $65.55. Copper rose 3 cents to $3.03, Gold bounced back above $1,200 to $1,207 and silver was 3% higher at $17.34. On the Ags, corn rallied 2.72%, wheat 1.36% and soybeans 3.18%.
On the data front today we have the BoJ and RBA interest rate decisions. Tonight sees the release of German industrial production tonight and then in the US the Redbook index is out.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
So how strong is the property market outlook?
Online advertiser, Real Estate Australia is an asset that reflects both the stock and property market outlooks. Last week, the share price managed to hold what looks like quite a significant support level around $41.70. Priced at around 28 times F15 earnings, this support may require the real estate market to keep swelling and what’s left of the print advertising market to keep dwindling.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC