– We should start off this week the way we finished the last with a general air of positivity in markets. It is, however, likely to be fairly quiet in Australian and Asian trade given the absence of any lead from the US which was out for the 4th of July holiday on Friday.
– Europe’s day wasn’t great though for stock traders or Euro bulls with shares in Milan down 1.49%, while those in Madrid fell 0.73%. The CAC dropped 0.47% to 4,469 while the DAX slipped 0.2% lower but still above 10,000, finishing at 10,009.
– On the data front in Europe, German factory orders missed by a long way, printing down 1.7% after last month’s 3.4% rise.
– Locally though, the September SPI 200 contract rose 13 points to 5493 bid. Today is likely to be a rangy day as the market awaits a fresh offshore catalyst and some very important local data later this week.
– On global bonds, coincident with the sell-off in European stocks, their bond markets rallied with German Bunds falling 2 points to 1,27% while Italian and Spanish bonds rallied 4 and 3 points respectively to 2.71% and 2.66%.
– In Asia on Friday, the weakness in the the yen helped the Nikkei rally but it was off its highs to close up 89 points or 0.58% to 15,437. The Hang Seng barely moved and stocks in Shanghai were down 0.2% to 2059. There is only one vaguely important piece of data today in Asia with the release of the Japanese coincident index.
– On Currency markets, euro opens the week at 1.2596 after four days of weakness but sterling is still strong with GBPUSD sitting at 1.7161. USDJPY is back above 102 at 102.07 and the Aussie is off Friday’s lows at 0.9362.
– On Commodity markets, Iron Ore barely moved for a change with September delivery 62% Fe down just 16 cents to $96.42 tonne. Newcastle Coal was stable at $70.50 tonne. Crude for July sits at $103.77, Gold is at $1,320 oz and Silver is sitting at $21.16 oz. Dr Copper hasn’t changed but is still strong at $3.26 lb while on the Ags, US pits were closed.
On the data front today we get AiG performance of construction and ANZ job ads for Australia before industrial production data in Germany. It’s a quiet one.
And now from CMC Markets’ Michael McCarthy is today’s Stock of the Day
Orica – filling the gaps
Last week, markets started re-pricing industrial metals in the light of stronger manufacturing data around the globe, notably China. This led to rallies in mining stocks. Towards the end of the week, mining services stocks and other related industries joined the fun. In Orica, this confirmed a recent double bottom on the chart (blue arrows).
This rise filled the first of three “gaps down” Orica made as it slid from $24.50 to the lows below $18.50, introducing the possibility of the next gap around $21.50 being filled. Traders who expound a gap-filling strategy suggest that gaps are filled because it’s a price level where investors were unable to act – and that share prices are attracted towards filling those gaps. Like any other indicator, this is not fool-proof – but it’s looking pretty reasonable on this chart (green arrows).
Anyone for $23?
Michael McCarthy, chief market strategist, CMC Markets
You can follow Michael on Twitter @MMcCarthy_CMC