– Stocks in the US continued to pull back a little overnight. But the big global macro story is the euro which has broken down below January’s lows and looks like it is headed toward 105. That’s the technical outlook and the view of ANZ currency strategist Brian Martin if 1.10 breaks. NAB senior economist David de Garis said part of the reason for the euro selling down to an 11-year low was the beginning of the ECB’s EUR60 billion a month in QE. Whatever the reason, in technical terms euro missed an opportunity to rally because of Greece when US data was printing very weak against market expectations.
– Speaking of data, the Fed’s Beige Book was out this morning reporting moderate/modest growth across the US economy. ADP employment was around expectations with a print of 212,000 (219,000 expected) and the ISM services in the US was better than expected at 57.1. That’s pretty solid. In Europe, the sevices PMIs undershot with all prints missing expectations. But retail sales for the EU mirrored the German surge, rising 1.1% in January against expectations of no change.
– But in the end, US stocks are lower on the day. Traders told our colleagues at BI US that the selling was largely on the back of profit taking after a nice run recently and some worries about the non-farms on Friday and what it might mean for the Fed’s rate hike intentions.
– Here’s the overnight global stock market scoreboard:
- Dow Jones down 0.58%, 106 points to 18,097
- Nasdaq down 0.26%, 13 points to 4,967
- S&P down 0.42%, 9 points to 2,099
- London(FTSE 100) up 0.43%, 30 points to 6,919
- Frankfurt (DAX) up 0.97%, 110 points to 11,390
- Paris (CAC) up 0.98% to 4,917
- Tokyo(Nikkei) down 0.59%, 111 points to 18,704
- Shanghai (Composite) up 0.52%, 17 points to 3,280
- Hong Kong (Hang Seng) down 0.96% to 24,465
- ASX Futures (SPI June) up 2 points to 5,879
– In Asian trade yesterday, the ASX, Nikkei and Hang Seng were all lower following from the weak US lead the night before. Shanghai was weaker initially as well but once the news broke that the Reserve Bank of India had cut rates again by 25 basis points, sentiment in Shanghai turned and it ended higher. No doubt a large part of that is hope that while the NPC is likely to downgrade growth expectations, the PBOC will be easing again soon. It’s hard not to share that expectation.
– On rates markets, US 10s closed at 2.12%, German 10s finished at 0.34% and UK Gilts closed at 1.90%. In Australian bonds overnight, three-year futures closed down 1 point to 98.09 and have retreated from 98.24 per the RBA March meeting. Ten-year futures rose 0.015 points to 97.42.
– On currency markets, the Aussie dollar’s performance is simply stunning given the weakish GDP yesterday and comments from RBA board member John Edwards implying more easing and a rising unemployment rate. The Aussie sits at 0.7822 this morning even though the euro has broken down to a new low at 1.1074. Sterling is also lower at 1.5258 and it’s looking increasingly likely that its recent rally is exhausted. USDJPY sits at 119.73 while the Canadian dollar is also strong at 1.2412.
– On commodity markets, copper is at $2.66 a pound, gold has dropped to $1,198 but the story is the rise in crude. Nymex crude was 2.47% to $51.77. Comments by the Saudi Oil Minister implying OPEC doesn’t rule the oil world anymore are interesting as well and worth a read. On the bulks, iron ore fell again with the June contract back below $60 a tonne from $1.44 to $59.43. Newcastle coal for June dipped 60 cents to $60.35 a tonne.
– On the data front today, retail sales for January is really important today in gauging where the Australian economy is in early 2015. Yesterday’s GDP was not strong but the consumer side of the economy is doing relatively well. Trade is also out and then tonight we get German factory orders, Italian GDP and the big event is the BoE and ECB board meetings.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
The BHP chart has reached what could be an inflection point.
The rally off the low at $26.50 had produced the kind of steep trend line that has a good chance of ultimately producing a sell-off (even if only a correction).
After flicking through its 200 day moving average on Friday, BHP has so far failed to get past it. Friday’s peak also completed an ab=cd pattern as outlined on the chart. If it breaks clearly below the trend line support now it will have rejected these 2 resistance points, meaning that some sort of sell- off looks like getting underway
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC