Here's your 20-second guide to what Aussie traders will be talking about this morning

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Here we go.

– Oil is tanking this morning having risen sharply in the past week as it became clear there is a strong supply response from US producers who are shuttering wells and reducing capital expenditure aimed at production. But the release of the EIA crude stocks data last night which showed a much bigger than expected build of 6.3 million barrels after last week’s 8.87 million build the week before suggests that the other side of the debate, demand, is collapsing faster than supply can be stopped.

– The reason I’m kicking off with oil this morning is because while stocks happily rally on free money and a low discount rate, the underlying economic activity and demand that supports elevated stock prices continues to erode. Which suggests to me that the touch of 5,800 on the ASX 200 yesterday, the highest level since April 2008, might be it for a while given it prices utopia in what feels like a distinctly non-utopian world.

– Why else would China have cut its RRR rate again yesterday if not in response to weaker demand both at home and abroad? They do have their eye on the RMB rate against the US dollar but that is indicative of my point about demand. Money is flowing home in this uncertain world.

– On the data front overnight, while the Chinese services PMI was weak there was some surprisingly positive data out of Europe with beats on services PMI in Germany, Italy, Spain, EU wide. European retail sales were also stronger, up 2.8% year-on-year in Decemeber after a 0.3% rise month-on-month. US Ism services was also a better print but ADP employment missed with a print of 213,000 against 225,000 expected.

– But regardless of this and with oil on a tear at the close, the scoreboard in the US reads strongly positive

  • Dow Jones up 0.04%, 8 points to 17,673 with a dive of 109 points into the close
  • Nasdaq down 0.23%, 11 points to 4,717
  • S&P down 0.39%, 8 points to 2,042

European markets finished mixed and those that did scramble into the black only did so late in the day. Greece looked good again and the index has dragged itself back to pre-election levels, according to Reuters this morning.

At the close:

  • London(FTSE 100) down 0.17%, 12 points to 6,860
  • Frankfurt (DAX) up 0.18%, 20 points to 10,911
  • Paris (CAC) up 0.39%, 18 points to 4,696
  • Milan (FTSEMIB) down 0.33%, 70 points to 20,942
  • Madrid (IBEX) down 0.19%, 20 points to 10,578

– Locally, with the pullback in the last 30 mins of trade the SPI 200 is now down 8 at 5,715. Futures traders had it at one stage up to 5,730 but the crash in oil looks like it may have some impact today. It’s worth noting that Newcastle coal for March only dipped 40 cents a tonne. 10 days in a row is a solid rally, so we’ll see.

– In Asia yesterday, China eased policy, freeing up almost US$100 million in cash into the system – assuming the banks put it there. But having preempted a massive stimulus program the day before, Shanghai shares fell 0.96%, 31 points to 3,174. In Japan, cracking results from Mitsubishi UFJ helped push the market up 1.98%, 343 points at 17,679. In Hong Kong, stocks were up 0.51% to 24,680.

– On bond markets, US 10s were up a tick at 1.78%, German bunds closed up 2 at 0.33% but Spanish and Italian bonds rallied 5 points apiece. In the UK, rates rose 8 points to 1.54% as traders get a sense that the warnings given them by BoE governor Carney were reinforced by the reasonably strong services PMI print.

– One other thing worth noting, and I’m not sure of the market impact yet, is that the ECB has released an edict saying that Greek bonds can’t be used as collateral anymore on the basis of the minimum credit rating criteria.

– The euro is down about 40 pips since the ECB edict came out at 1.1390, after being comfortably above 1.14 earlier this morning. The ECB action suggests some sort of ruction, or at least increased pressure, with and on Greece. So watch this space. GBP is a little lower than earlier but sits at 1.5202, USDJPY has dipped to 1.1727 and the Aussie is now back under 78 after itself being comfortably above before the euro swoon. It’s at 0.7761.

– On commodity markets, oil has cracked it, falling 8% to $48.83 as noted above and gold is down at $1,264 an ounce. Copper is up a little at $2.5920 a pound. On the bulks, iron ore fell 7 cents to $62.75 a tonne and Newcastle coal closed down 40 cents at $63.55.

– On the data front, retail sales today in Australia will be very important and the market is expecting a rise of 0.4% in January. HIA new home sales are also out. Tonight German factory orders are to be released and then we get a BoE interest rate decision and jobless claims in the US.

And now from CMC Markets’ Ric Spooner is today’s Stock of the Day

Qantas

Stronger oil prices stopped Qantas’s late January rally. From a chart point of view, this means the price action in Qantas since December is now setting up as a possible bearish head and shoulder pattern.

There’s a fair way to go for this to be completed, however. A break below the blue support or neck line would be required. What also interests me, is the price gap just below the neck line. This looks like a potential support area that could turn a move below the neck line into a false break.

So one strategy with this chart would be to have it on the watch as a potential buy if there is a return to the neckline and gap support. While a break below the $2.13 area would be a bearish development.

Ric Spooner, chief market analyst, CMC Markets

You can follow Ric on Twitter @ricspooner_CMC

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