Good morning. For some.
– A bad night for stocks as the pressure builds on traders and investors to justify current pricing, to themselves as much as anyone, and the IMF downgraded the outlook for global growth in the years ahead. Importantly though, the IMF mentioning that some sharemarkets were “frothy” simply reinforced what traders have been clearly thinking for a little while lately as the sawtooth volatility has increased.
– So at the close this morning, the Dow dropped 273 points or 1.61% to 16,719, the Nasdaq fell 1.57% and the S&P 500 lost 30 points, or 1.52% to 1,935.
– The moves in stocks have been “confirmed” – if I can call it that – by the big reversal in USDJPY which is a natural safe haven in times of volatility and is this morning trading below 108 and US 10s which rallied 8 points to 2.34%.
– In Europe, the best performing market was the FTSE but it too fell more than 1%, off 1.03% to 6,496. The DAX lost 1.34% to 9,086 and the CAC was 1.81% lower at 4,209. In Milan and Madrid, stocks fell 1.73% and 2.02% respectively.
– The impact of the moves has not been lost on local futures traders, with the December SPI down 58 points to 5200. This is not over yet, so I’m still 100% cash in super.
– In Asia yesterday, the Nikkei fell 0.67% after rallying from early lows. The BoJ decision and Governor Kuroda’s speech to Parliament left traders cold, with an afternoon selloff accompanying the rally in the yen.
– On Currency markets, the yen rally is entirely normal given the circumstances but the reversal of the US dollar’s fortunes against the other majors is more a reaction to the full pricing of expectations for the moment. Looking at the Aussie dollar, don’t believe reports that it was the RBA which helped drive the AUDUSD higher – that is not the case. Rather it was the USD move and the yen specifically which took the Aussie with it yesterday afternoon.
– This morning though, all the majors are doing better against the USD. Euro is 1.2664, GBPUSD 1.6093, USDJPY 108.02 after being below 108 earlier and AUDUSD is above 88 cents at 0.8813.
– That’s a remarkable performance from the euro given the train wreck that is becoming German growth. Last night the release of the August industrial production data, which fell 4% against expectations of a 1.5% fall, reinforced how weak the economy is becoming.
– Weaker US dollar is normally good for commodities but in the context of the IMF taking the wind from the sails of the global growth bulls, Nymex crude has crashed below $90 a barrel down 1.68% to $88.82. Copper was stable at $3.03 a pound and gold is at $1,210 an ounce. Wheat is up 2.24%, corn rose 2.11% and soybeans were up 0.84%. December iron ore rallied 29 cents a tonne to $79.33 while Newcastle coal was up 85 cents to $66.40 a tonne.
Today we see the release of the Chinese HSBC and Chinese PMI but there is no Australian data of note – or indeed, European data – and tonight we get FOMC minutes in the US.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
We head into a weak opening this morning with a number of stocks sitting at what look pretty significant support levels. These tend to be high yielding or high multiple stocks.
One example is Seek. Trading on a multiple of 25 times F15 earnings, yesterday saw it sneak below the $15.80 support that has held since the February results announcement. It’s also getting under the 200 day moving average for the first time since December 2012. A close clearly below this support would be a sign of weakness.
The next obvious support is around $14.90/$15.15.This is the top of the February gap and also the 50% retracement of the rally from the February low. At this level, Seek would be trading around 24 times F15 earnings.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC