Good morning. Here’s your apologetically later than usual update:
– The grand rotation out of Australia and Australian assets from global managers seems to have been given a little more impetus after yesterday’s much weaker than expected Q3 GDP figures. The big miss in the numbers was the fall in private capital formation which looks like it is going to be a further drag in the quarters ahead.
– So with the chances of an RBA rate cut, or at least a shift to an easing bias, growing and with more banks now leaning in that direction, the ease with which investors hold AUD assets has changed materially. Indeed, the NAB highlights in its morning notes that “It’s only three months ago that the AUD had a 94 handle.” That’s a capital loss of over 10% for unhedged investors holding Aussie so the NAB says that “the market will be paying close attention to this morning’s retail trade report for October, the headline – that we expect could be skewed to weakness – but the underlying trend, taking the apparent impact of the iPhone 6 on sales in Sep/Oct.”
– Adding to the weight on the Aussie is the fact that the US economic data last night was solid with the ISM non-manufacturing (services) printing 59.3, almost 2 big figures better than expectations and close to a nine-year high. Equally, the ADP payroll data printed above 200,000 and the Fed’s Beige book this morning was bullish on growth.
– So stocks rally and the Aussie dollar is at 0.8403. In particular, US markets were all in the green.
- Dow Jones up 0.18% to 17,913.
- Nasdaq up 0.39% to 4,774.
- S&P 500 up 7.78 points for a 0.38% rally to 2074, a fresh all-time high.
– European Markets were all higher on expectations the ECB will put its money where its mouth is tonight. But the FTSE was a bit miffed with the economic briefing, growth projections and new revenue raising measures UK Chancellor of the Exchequer George Osborne announced overnight.
- London(FTSE 100) down 0.38% to 6,717.
- Frankfurt (DAX) up 0.38%, last nights magic number, to 9,972 – overhead resistence techniclally remains close
- Paris (CAC) up 0.08% to 4,392.
- Milan (FTSEMIB) the periphery loves the ECB and draghi, up 1% to 19,978.
- Madrid (IBEX) even better than Italy, up 1.18% to 126.70
– One thing to note – Spanish 10-year bonds are at 1.84% and Italian bonds just closed below 2% at 1.96%. It’s like the golden days of LTCM have returned.
– Locally futures traders on the ASX’s SPI 200 Dec contract overnight took prices up 11 points, hinting at a better day with the futures close at 5347 bid.
– In Asia, Shanghai is still ripping higher as a wall of cash enters the market. Bloomberg reported that volumes yesterday were around double the daily average. Hong Kong appears to be still struggling with protests while the Nikkei loves global QE and a weaker yen closing in on 120.
Here’s the Asian Scoreboard:
- Tokyo (Nikkei Average) up 0.32% to 17,720
- Hong Kong (Hang Seng Index) down 0.95% to 23,429
- Shanghai (Shanghai Composite Index) up 0.58% to 2,780
– On currencies, the US dollar was mixed over the past 24 hours, belting the euro (1.2308) and yen (119.79) and knocking the Aussie lower to 0.8404. The pound was higher after Osborne’s call and is at 1.5685 this morning.
– On commodity markets, Nymex crude is up 0.73% to $67.37 a barrel while gold is up at $1,211 suggesting someone, somewhere is worried about the potential for instability in the future. Copper dipped back to $2.969 a pound and on the Ags, wheat was off more than 2%, soybeans dipped 0.81% and corn was roughly flat. Australia’s bulks saw iron ore for Dec delivery unchanged and coal of 35 cents a tonne.
On the data front today, retail sales are going to be huge and as the NAB says, could be on the weak side after the iPhone spending splurge last month. Monthly trade is also out and then it’s the BoE and ECB decisions tonight as well as jobless claims in the US.
And here’s Ric Spooner from CMC Markets with the Stock to Watch
Woolworths is in the news with press reports that it has bought into China’s liquor market. Woolies is looking to capitalise on its expertise in liquor retailing, buying Chinese distributor Summergate. This gives it a foot hold in what could be a major growth market as China’s middle class and wealth develops.
Yesterday was also an interesting day for chart followers. The 2.3% rally not only gave beleaguered Woolworths shareholders something to be happy about but looks as though it could have signalled the end of a 5 swing downtrend. This began back at the end of October when the share price rejected the 200 day moving average at $35.93.
The clue to this potential reversal comes from Tuesday’s low which rejected Fibonacci projections. One of these is a projection that the last swing down from ‘4’ would be 38.2% of the length of the swing down from ‘X’ to “3”. This creates the possibility that we could now see a significant rally to correct the whole downtrend that began up at $35.93.
Ric’s on Twitter: @ricspooner_CMC
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