Welcome to your short week. Here’s your heartstarter.
– Another day, another new all-time high for the S&P 500 at 1,956, while the German DAX joined the party, closing at 10,009 – besting a 10,000 close for the first time in its history.
– There are no fresh catalysts for the new highs but the situation was summed up nicely in a piece US colleague Joe Weisenthal published over the long weekend which you can find here. The premise that this is a “Macro Boring” market is the key to what’s going on. Super low rates, QE and nothing – besides maybe the bond sell-off – on the horizon to derail the rally. The Minskyite in me is getting nervous.
– Anyway, back to overnight trade and the S&P 500 couldn’t hold the highs and drifted back to finish at 1,951, up 2 for a gain of 0.08%. The Dow rose 0.11% to 16,943 while the Nasdaq rose 0.34% to 4,336. Data-wise it was light in the US overnight but looking back to Friday, non-farm payrolls rose 217,000 which was around what the market expected. This is worth noting in the context of comments overnight during a speech from Fed President James Bullard, who outlined how close the Fed is to meeting its policy goals.
– In Europe, it was a sea of green with the FTSE up 0.24% to 6,875, the DAX as noted above closed at 10,009 and the CAC in Paris was 0.17% higher at 4,589. In Milan and Madrid, the party continues with the FTSE MIB up 0.82% and the IBEX 35 climbing 0.90%. Speaking of Spain, the 10-year yield is now below the US Treasury rate – go figure.
– In Asia, yesterday it was a rip-roaring day for Japanese data with Q1 GDP rising 1.6% (versus 1.4% expected), which took the year-on-year rate to a stunning 6.7%. Equally exciting was the Chinese decision to cut the reserve ratio for banks which target the rural sector by 50 basis points, effective June 16. But while the Hang Seng ripped 0.72% higher to 23,177, the Nikkei only rose 0.31% to 15,124 and in Shanghai, stocks rose only 0.05% to 2,031. No doubt the Nikkei is getting worried about a reduction to stimulus and Shanghai simply referenced the specific nature of the Chinese stimulus. Today in Asia we get the Japanese tertiary industry index, while in China the CPI will be released along with new loans.
– All of the above should lead to a better day on the ASX, which last traded up 14 to 5492. Mining stocks were up in London trade but Iron Ore was lower once more so it’s not a linear extrapolation. The topside looks more likely today.
– On Bond markets in the US the 10s were stuck at 2.6% again but German 10-year Bunds rose 3 points to 1.38% and Gilts were up at 2.70%. Locally, the 3s fell 2 points to 97.135 (2.865%) while the 10s lost 2.5 points to 96.19 (3.81%).
– On Currency markets, the euro was poleaxed last night and is off more than 70 points from yesterday’s trade at 1.3598 – but realistically, week-on-week, it is dancing on the spot. The pound is at 1.6808 and USDJPY is becalmed at 102.545. FX volatility is absent and the Aussie is at 0.9350 this morning.
– Crude is having a scary surge again with the June Nymex contract up 1.7% to $104.54 Bbl this morning, while Gold is consolidating around $1,250, closing at $1,253 with Silver at $19.05 oz. Copper is going down again and the bulls will be smarting from the sharp reversal off last week’s highs – it sits at $3.05 this morning. Iron Ore is also down again with the September contract sitting at $94.50 tonne.
– On the data front today we have the Asian data noted above while at home we get ANZ job ads together with home lending data and the NAB business survey – the most important release in our economy. Tonight, it’s production data in Europe and then the NFIB business index in the US.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
The markets can be a nag, I reckon. It seems to delight in reminding me of the basics of the trading game. One its favourite refrains is that “patience is a virtue”.
Three weeks ago, I featured the resistance formed by the March low in Fortescue at around $4.67. A break above this would look like a sign of potential strength. There was no clear break above this level. Instead price rejected the resistance and drifted lower.
The move lower has not, however, been particularly convincing. The momentum has been low. This is reflected in bullish divergence with the RSI.
Relief that China’s exports improved as expected in May plus the fact that the iron ore price has stopped falling might bring this $4.67 level into play over coming days. If not, another possibility might be more low momentum basing behaviour that could set up a reversal pattern like a head and shoulder.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC