Friday. You’ve been waiting for this. But first, this:
– A new era has begun at the ECB which announced negative deposit rates last night and set up the infrastructure to conduct its own version of quantitative easing later this year if it deems it necessary. The refi rate is now 0.15% and the deposit rate -0.1% for balance in excess of reserve requirement.
– This is an important step because it signals to stock market traders that even though the Fed is tapering its own balance sheet purchases, there is a fresh pool of cash likely to be made available each month at a price so close to being free that the risk reward favours goosing stocks higher.
– And so it was overnight, with the DAX in Germany making a new all-time high of 10,014 before closing at 9,948 up 0.21%. The CAC rose 1.07% to 4,549 but the FTSE fell 0.08% to 6,813. In Milan and Madrid, stocks were sharply higher to 1.52% and 1.12% respectively.
– In the US, stocks traders didn’t miss the import of another player at the table handing out cash, driving the S&P to another new all-time high and a big close of 1,940, up 0.63%. The Nasdaq rose 1.04% and the Dow was 98 points or 0.59% higher at 16,836.
– Locally, this has helped the ASCX June SPI 200 contract rise 10 points to 5,451 bid. The Aussie market is still lagging badly and iron ore for September futures’ rejection of the downtrend line last night with a fall of $1.20 a tonne won’t help today.
– Bond markets globally like the ECB action with German 10s dropping 3 points to 1.41% while rates in Spain and Italy dropped 7 and 8 points respectively for massive capital gains of 2.32% and 2.63% on the day. Locally the 3s lost 1 point in overnight futures trade to 97.15 (2.85%) while the 10s lost 1.5 points to 96.215 (3.785%). US rates were down 1 point to 2.59%.
– Asian markets will like the moves in Europe and the US today but they will also be very focused on the release of Chinese trade data as an indication of where the economy and growth is at the moment. Yesterday the Shanghai exchange was the standout after the central bank injected funds into the market again, counterbalancing the weaker-than-expected Services PMI. At the close, stocks in Shanghai had risen 0.8% to 2,041. The Hang Seng fell however, down 0.18%, while the Nikkei eked out a 0.07% gain to 15,079.
– On Currency markets, the euro fell initially but then bounced solidly to be up on the day at 1.3662, which is just ridiculous on a fundamental basis. But who said that matters in a world of free love and cash? Sterling has topped 1.68 with GBPUSD at 1.6816 this morning while USDJPY sits at 102.41.
– The Aussie dollar is much higher this morning as traders and investors see the benefits of high rates and strong growth – it sits at 0.9335 at the moment. You can read more on the Aussie here
– On Commodity markets, June Nymex Crude sits at $102.46, Gold is up around $9 to $1,253 while Silver is back above $19 oz up 1.54% to $19.05. Copper is at $3.09 but there was more weakness on the Ags with losses of between 1.4-1.6% for Corn, Wheat and Soybeans.
Chinese trade today and non-farm payrolls tonight in the US are a huge end to the week. German industrial production and trade data for Germany, France and the UK are also important, although less so.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
The CBA trend channel I discussed as a stock to watch last week continues to behave in text book fashion. Since then, profit takers did come back in at the top of the channel seeing the resistance respected a fourth time.
The more mature this channel becomes, the greater the possibility of a break below the support. Some CFD traders who shorted at the top of the channel may have taken profits at the support yesterday. Others may be prepared to simply tighten their stop out orders (e.g. above yesterday’s high) to give themselves a chance of being in for the ride if the support does break.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC