-Another interesting night offshore with the NAB characterising trade nicely saying that “There wasn’t a lot of news overnight, but what there was, was on the negative side”.
– And so it was – German factory orders tanked 3.2% in June against the 1% rise expected. Italian GDP fell 0.2% in Q2 2014 when a rise was expected and UK manufacturing production was weaker than expected at +0.3% in June. Greek banks were sold off as were peripheral bonds and the Ukrainian tensions continue.
– Hardly a great night even though US markets recovered over the course of the day from the early European lead weakness. At the close the Dow was up 14 points to 16,443 for a rise of 0.08%. The Nasdaq was up just two points to 4,355 and the S&P was unchanged at 1,920.
– European stocks were understandably weak given the above with the FTSE off 0.7% at 6,636, the DAX in Frankfurt fell 0.65% to 9,130 and the CAC dropped 0.61%. Spanish stocks dropped 1.04% but Italian stocks were poll axed after the GDP data fall of 2.7%.
– Locally the impact has been that the SPI 200 September futures contract has fallen 8 points to 5,447.
– In Asia yesterday it was negativity all around with the Nikkei off 1.03% to 15,160 while stocks in Shanghai continued their reversal from the recent one year high falling back a little to 2,217 for a small loss of 0.13%. In Hong Kong stocks dipped back 0.26%.
– On bond markets US 10 year Treasuries rallied to 2.43% before selling off to close down 2 points to 2.47%. One thing to note amidst the recent strength of US 10’s is the ANZ Macro Strategy team reckon US rates are on their way up – substantially higher.
– The big move in bonds was Italy though with 10s up 16 basis points (capital loss of 6.19%!!!) to a still low 2.81%. UK 10 year Gilts rallied 6 points after the weaker data to close at 2.52% while bunds rallied an enormous 7 points or 6.09% as traders clearly switch from the risky yield of Italy to the safe haven of Germany.
– Strangely while these bond ructions were a result of the weak European data somehow the Euro managed to rally off its low for the day in the 1.3330 region and is back at 1.3380ish this morning. This US dollar weakness resulted in a bounce in the Aussie dollar which is back at 0.9350ish this morning. Sterling is down at 1.6954 and looking very wobbly while USDJPY fell to 102.10.
– On commodities iron ore for September delivery was down 37 cents to $95.55 while Newcastle coal for the same data was unchanged at $70.85 tonne.
– Elsewhere copper tanked back to $3.16 lb while gold rallied $20/oz to $1,306 on the rising uncertainty. Nymex crude continues to fall losing 54 cents to $96.84. On the Ags – wheat rose 2.9%, corn was up 1.68% and soybeans 1.15%.
On the data front today we have employment in Australia with the market expecting a small rise of around 12,000 and an unemployment rate of 6%. Tonight we see industrial production in Germany, French trade and the huge ECB and BoE decisions – even though no one expects any material change from either central bank. Jobless claims are out in the US.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
CBA will release its profit result next week. It represents 8.7% of the entire value of the All Ordinaries Index. What happens to its price is pretty important for general market sentiment.
Last week’s surge into new high territory has been short lived at this stage. The move back below the $82.03 trend peak is a minor sign of nervousness. What will be more interesting from a chart point of view is whether or not CBA can hold support of its 20 and 40 day moving averages plus the old trend line resistance. A clear move below this might bring the major support around $79.84 back into play.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC
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