Good morning. You’ve almost made it but first, let’s get Friday moving.
– The ECB did it again. Disappointed that is, with another delay it action and more commitment to words. Indeed the ECB’s physical intransigence but verbal flexibility is so great that many column inches this morning have been given over to an interpretation of a subtle change in language with regard to the ECB’s quantitative easing program. In Mario Draghi’s press conference he said that, “asset purchases will have a sizeable impact on our balance sheet, which is expected to move towards the dimensions it had at the beginning of 2012.”
– “Expected” replaced “intended” which has many commentators a-flutter as a sign of the ECB’s commitment to QE. But yet they use words instead of action – again. So the euro rallied, but ran into resistance, and the stock markets in Europe were all in the red. Oh, and while Draghi and his colleagues channel Nero, French unemployment hit 10.4% – back to record levels.
– In the US, stocks went out in sympathy, but only just, as they await the last non-farm payrolls of the year. The market is expecting unemployment to be 5.8% and non-farms to rise 232,000 when the data is released at 12.30am AEDT tomorrow.
– So, given the lead from Europe and the import of non-farms, it’s no surprise that US markets have drifted off toward the close.
- 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 stock markets were all lower with particular carnage in the Club Med markets of Italy and Spain.
- London(FTSE 100) fell 0.56% to 6.679 dipped after lunch
- Frankfurt (DAX) boom, crash – 10,084 high on the day before a fall to 9,851 with the market down 1.21% at the close
- Paris (CAC) off 1.55% after lunch, when Draghi spoke as well, to close at 4,324
- Milan (FTSEMIB) fell 2.77% to 19,424, all in the afternoon
- Madrid (IBEX) down 2.35% to 10,620
– Locally, futures traders have only moved the dial on the Dec SPI 200 futures 1 point overnight to a 5,369 close even though iron ore rallied strongly.
– In Asia yesterday though, wow. What a move again in Shanghai stocks. The PBOC has been adding cash this week which is driving prices substantially higher. It was only 4-6 weeks ago that I suggested we’d see Shanghai 3000 on a 12-month basis and here we are with the index closing yesterday at 2,899, up 25.67% on a three-month basis and 19.50% in the past month. That’s a boom, far and fast and perhaps, at some point, ripe for a reversal.
– Here’s the Asian Scoreboard:
- Tokyo (Nikkei Average) up 0.94% to 17,887 as the yen hit 120
- Hong Kong (Hang Seng Index) up 1.73% to 23,833
- Shanghai (Shanghai Composite Index) up an incredible 4.3% to 2,899
– On currency markets, the euro rallied to 1.2456 but crashed into overhead resistance and is back at 1.2379 this morning. Non-farms tonight will be important for this 3-month trend, its continuation or end. GBP also rallied but is at 1.5680 this morning and USDJPY is 50 pips off the high overnight at 119.71.
– The Aussie is at 0.8385 after finding some support at 0.8353 last night which is right on the bottom of a 3-year down channel.
– Bonds sold off in Europe, but only a little, with German bunds up 3 to 0.74%, Italian and Spanish bonds up 4 points each to 2% and 1.88% respectively.
– Turning to commodities and crude oil is down again with Nymex off 0.93% to $66.75. Gold is at $1,206, copper at $2.91 while on the Ags, corn rallied 2%, soybeans 0.88% and wheat was flat. Australia’s bulks were mixed with Dec 2014 iron ore up 98 cents while March 2015 rose $1.44 to $70.04. Coal for March was up 10 cents to $62.75.
On the data front, we get the AiG performance of construction index this morning in Australia, factory orders in Germany, EU GDP and then non-farms in the US. It’s a big end to the week.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
The much awaited Financial System Inquiry report will be released on Sunday and bank stocks have had a strong rally leading into it. Interesting times.
CBA bounced neatly off the support of its 200 day moving average and the 38.2% Fibonacci retracement level on Tuesday. It won’t be possible to say that the correction of the last major rally is definitely over until CBA takes out its recent high at $82.98.
However in those circumstances, the fact that it only made a relatively shallow 38.2% retracement would be a potential indicator of a strong ongoing uptrend.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC