Good morning. Let’s get it started.
– While it might not have been the most interesting night on the NYSE – even if they did get Tony Abbott ringing the opening bell – there were a couple of really important macro themes that are worth highlighting.
– Firstly the data in the US was great – really, really good. The NFIB small business survey hit 96.6 in April which is the highest level in seven years – yep, pre-GFC! Also out was the JOLTS (Job Opening and Labour Turnover Survey) which showed that there were 4.455 million job openings in April, well clear of the 4.050 the pundits expected.
– Both data were solid and while euro was already under pressure before the data, they certainly reinforced the dicotomy between the two regions. Indeed, rating agency S&P last night issued a report saying that the EU had simply moved from the acute phase to the chronic. It’s a view I share and why I am short euro.
– The other major theme away from the FX market, but not entirely unrelated, was the sell-off in bond rates in the US with the 10-year Treasury up another four points to 2.64%. That’s its highest level in a month and an earlier auction of three-year notes which went off at a ridiculously low 0.93% is worth highlighting because that’s the highest level since 2011! 10-year Bunds in Germany rose 3 points to 1.41% while in the UK they rose two to 2.72%. In the periphery, and in a sign complacency might be ending, Italian bonds rose 9 points to 2.79% and Spanish 10s were up 4 to 2.62%.
– So traders – a warning. As Minsky showed us, stability leads to instability and this period of relative stability in markets might – it’s only a might because it’s early days – be transitioning to higher volatility sometime in the next few months.
– Anyway, back to overnight trade and Tony Abbott’s bell-ringing talents left the market cold with the Dow, S&P and Nasdaq all down at the open. But they recovered over the course of the day with the Dow finishing at 16,946, up a meagre 0.02%. The Nasdaq rose 0.04% to 4,338 while the S&P slipped ever-so-slightly into the red, down 0.01% to 1,951.
– In Europe, the UK market trade looked more like the US with the FTSE down a smidge at 6,874. The DAX and CAC, however, were more volatile but managed to settle higher at 0.20% and 0.13% respectively. In Milan and Madrid, stocks were 0.14% higher and 0.09% lower respectively.
– In Asia yesterday, it looks like the fact the yen stopped weakening after the solid GDP data the day before took the wind from the Nikkei’s sails with a fall of 0.85% to 14,995. The Hang Seng rose by almost the same amount and Shanghai rose by a very solid 1.11% to 2,053. Key to Hong Kong and Shanghai rallies was the targeted reserve ratio cuts we saw the previous day.
– The wash-up for Australian markets is that the June SPI 200 contract is up just one point at 5478 bid while the bond boards are under a little pressure with the 3s down 2 at 97.135 (2.865). The 10s suffered from the global sell-off, down 4.5 points to 96.165 (3.835%).
– On Currency markets, as noted, euro fell out of bed and sits at 1.3543 this morning. Its weakness hurt sterling as well, with GBPUSD down to 1.6751 while USDJPY slipped back a little to 102.35. For the Aussie, the buyers are certainly there and seem to agree with Morgan Stanley that the Aussie will trade higher and it sits at 0.9371 this morning.
– On Commodities, Iron Ore fell out of bed again with the September contract back toward recent lows down $1.50 tonne at $93.00. Nymex June Crude is at $104.28, Copper gained a cent to $3.06 and Gold picked up another $6 an oz to $1,261. Silver is at $19.05. On the Ags, Wheat and Corn fell heavily, down 1.22% and 1.84% respectively. Soybeans rose 0.34%.
On the data front today, Chinese new loans are out but locally we’ll be focused on the Westpac Consumer Sentiment numbers to see if we get the hoped-for bounce. Tonight is fairly quiet with Uk unemployment and US mortgage applications due out.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
After falling 24% over the last month, this stock has reached an interesting place.
The market is nervous about the all-important winter sales period fearing the impact of budget blues and May’s warm weather. Yesterday’s downgrade by Pacific Brands didn’t help atmospherics.
Despite recent gloom, the share price has managed to hang on around trend line support not far below its 200 day moving average. Last week’s low at $3.03 may now be a line in the sand. Any push below that may indicate the support area has cracked with sellers having the weight of numbers.
In the meantime, potential sellers might be hoping things go the other way with a corrective bounce to create better value.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC