BOOM, what a night.
– Or, more correctly what a morning, after the release of the FOMC minutes ignited a risk-on rally which set markets alight. The minutes were taken as dovish by the market meaning that traders reckon it might be a bit longer until rates start to rise.
– The US dollar was hit hard as it became clear that members of the FOMC were concerned about the impact of recent strength on growth while stocks ripped higher.
– At the close, the Dow was up 275 points, or 1.64%, to 16,994. The Nasdaq rose 1.91% to 4,469. The S&P was up 34 points, or 1.75%, to 1,969.
– The question for traders as US earnings season kicks off today is whether the rally last night will prove as ephemeral as recent strength or a more sustainable rally or consolidation. For the moment the latter outlook seems more likely but the volatility and the reaction to a delay in raising rates shows how addicted markets are to free money. It’s more, not less concerning in the context of the Fed eventually taking away the free money punch bowl.
– Europe, of course, missed the action as the market was closed so it’s hardly worth noting the falls on the continent. The DAX dropped 1%, the CAC 0.98% and the FTSE was 0.21% lower. Unless something goes haywire in Asian trade today, expect Europe to open sharply higher.
– Australian investors and stock traders will have a more pleasant day today – as long as we don’t get another rogue employment number – with the December SPI 200 futures up a stellar 57 points to 5282. The rally might have more legs in it yet.
– On Rates markets, US 10s fell 2 points to 2.32%, UK Gilts dipped 2 points also to 2.27%. German Bunds finished at 0.87%.
– Turning to Currency markets and the US dollar selling was relentless from the moment the market caught sight of the FOMC minutes. The Aussie dollar is more than a cent higher now at 0.8845, euro rallied almost as much to sit at 1.2738 and the yen is at 108.12. GBPUSD rallied 1.3 cents to 1.6177 this morning.
– On Commodity markets, crude fell 1.35% to $87.35 a barrel after a big build of stocks was announced overnight by the EIA. Iron ore fell heavily as well, down $1.70 a tonne for the December futures to $77.35 while Newcastle coal for December rose 20 cents to $66.60 a tonne. Gold is up to $1,223 but seriously lagging while copper remains calm at $3.03 a pound. On the Ags, wheat rose marginally up 0.36%, corn was 0.65% higher and soybeans fell 0.74%.
On the data front today, the new and improved – maybe – non-seasonally adjusted employment data for Australia will be released today with the market looking for a solid gain of around 20,000. Westpac consumer confidence is also out and then tonight we see the release of German trade data, a BoE interest rate decision and jobless claims in the US.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Tuesday’s low saw Wesfarmers’ share price get close to chart support around $41.30.
While another rejection of this line would be encouraging, a break below support doesn’t look out of the question. Wesfarmers is trading on a multiple of around 19 times F15 earnings; the stochastic indicator continues to show strong downward momentum and there’s not a lot of joy from coal prices.
If there is a clear break below $41.30, the August 2013 low at around $39.40 and the 38.2% retracement at around $38.40 are potential support levels
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC