– It easy for many to say that this sell-off in markets is just a correction from the highs. This is the fare served up by many overnight after US stocks continued their sell-off with the Nasdaq now down close to 7% from its recent peak. But traders will be starting to get the jitters about these moves because there is no obvious catalyst – not ex-ante and certainly not ex-poste. All we know is the market leaders of this rally, so called momentum stocks, are getting creamed. If traders can’t explain it, these moves will be making many nervous that a bigger, deeper pullback is in the offing. The technicians say watch 1,830 on the S&P as the first sign something is about to break.
– At the close, the Dow is off 1.02% for a loss of 167 points to 16,246. The Nasdaq dropped 1.16% to 4,080 while the S&P 500 lost another 20 points or 1.08% to 1,845.
– The impact locally is going to be felt on the open this morning with the June futures showing the SPI 200 lost 18 points to 5389 after the market inexplicably bucked the weakness in Asia yesterday.
– Speaking of Asia, the Nikkei is looking weak technically and is down for the third day in a row, losing another 1.69% in trade yesterday. Part of the reason is clearly the weakness evident in global stock markets but equally at times like these – when risk goes a little off – the yen strengthens and this has driven USDJPY back to very important technical support. The yen sits at 103.09 this morning and traders are watching the 102.80/90 zone very closely. Chinese markets are back from their holiday today and the Shanghai exchange is likely to be pressured lower. On the Asian data front, the key data is Japanese Trade and the BoJ decision.
– In Europe, stocks were lower as you’d expect in this environment with only 9 of the FTSE’s components rising in trade overnight before it closed down 1.08% at 6,623. Stocks came under intense pressure with the DAX down 1.91% to 9,511 while the CAC lost 1.08% to 4,436. In Milan and Madrid, stocks fell 0.85% and 0.67% respectively.
– On Currency markets, the euro managed to rally, even though some ECB members talked about QE and how it might work in Europe overnight. This morning it sits at 1.3740, off the 1.3688 low overnight. Perhaps slightly better industrial production in Germany helped the euro but the moves makes little sense fundamentally – so it’s technical trendline support that gets the credit. Elsewhere, sterling rose and is at 1.6605 this morning while the Aussie dollar once again couldn’t hold above 93 cents, making a 0.9301 high before reversing to sit at 0.9265 this morning.
– On Commodity markets, it was quieter with Nymex crude down 0.41% to 100.73, Gold losing $5 oz to $1,296 and copper managing to rise 2 cents to $3.06 lb. On the Ags, Corn fell 0.40%, Wheat rallied 0.93% while Soybeans fell 0.80%.
On the data front today, the NAB business survey is the key release and will give a good read on what’s happening across the economy. In Japan, it’s the BoJ, trade and economic sentiment survey before the French budget and trade data. In the UK, industrial production will be important for the pound and then in the US NFIB business optimism is released.
Here is CMC Markets Stock To Watch Today from Chief Market Analyst Ric Spooner
Wesfarmers was in the news yesterday completing its exit from the insurance industry through the sale of its broking subsidiary. This raises the possibility of a return of capital to shareholders and has seen the stock rally to the resistance of its 200 day moving average after bouncing off triangle support last week.
A clear break above the 200 day moving average in coming days would be a positive sign, creating the prospect of a return to the triangle resistance or beyond.