Good morning and welcome to your week.
– Very interesting night Friday for stocks with a lot of bullish chat about non-farm payrolls in the lead-up to the data giving way to disappointment when the data printed a rise of 214,000, 21,000 shy of the 235,000 expected. Certainly there was good news in the unemployment rate falling to a 6-year low of 5.8% and some weird seasonals seemed to knock more than 100,000 off the total. US labour market momentum is strong.
– So after a quick swoon into negative territory after the data was released, stocks in the US spent the day grinding away around the previous day’s close. At the end of the week, the S&P 500 ended at a new all-time high close of 2,032 – up only a point on the day but 14 for the week to record a gain of 0.69% over the five days. The Dow rose 1.06% to end the week at 17,574 while the Nasdaq was quiet, up just 2 points on the week to 4,633.
– In Europe, markets finished lower on the continent after banks came under pressure and the Euro STOXX banking index fell 1.7% lower. It’s all related to the weak European economy and the ability to grow their businesses and write new loans. On the data front, German industrial production missed to the low side, printing +1.4% on the month against 2% expected but that is still much better than the -3.1% print last month. Trade was interesting however, with the trade balance for September hitting the market’s target of 18.5 billion euro but exports and imports were much, much, stronger than expected, rising an unbelievable 5.5% and 5.4% respectively.
– So at the close in Europe, the DAX was down 0.91% Friday, losing just 0.37% on the week. That’s a good result given that stocks in Milan and Madrid dropped 3.48% and 3.36% over the week. The FTSE was the only major European market to rally over the week, finishing at 6,567 up 0.31%.
– Locally, last week was solid with a rise of only 25 points masking the midweek swoon and two of the Big 4 going ex-dividend. So at week’s end, the ASX 200 physical finished at 5,549 – its best close in 8 weeks. On Friday night, futures traders let the SPI 200 contract drift 3 points to 5549. But that’s not much of a lead. Having said that though, gold and iron ore futures rallied, so maybe…
– In Asia at the moment we have the APEC summit in Beijing and Chinese Premier Xi Jinping reiterating to anyone listening that Chinese growth is and will remain strong. That was too late for Shanghai stocks Friday, however, with the composite index off 0.32% to 2,418 but roughly unchanged on the week. In Hong Kong, stocks dipped to 23,550 for a loss of 0.42% on the day and -1.87% on the week. In Tokyo, the afterburners of the BoJ’s big cash injection saw the Nikkei end the week at 16,880, up 466 points over the 4 days for a gain of 2.84% on the week.
– Asia will be a focus this week for both APEC and data with Chinese CPI, PPI and new loans due out today. Saturday’s remarkable trade data showed an 11.6% rise in exports (a lot went to Hong Kong so it looks a little dodgy in terms of real trade and not capital flows via invoicing) and a 4.6% rise in exports.
– On Rates markets, the disconnect between rates traders, unimpressed with promises of growth and inflation – or at least leery that it will happen – and stock traders hooked on free money continues. In the US, the 10s finished at 2.3%, German 10s at 0.78% and rates in the UK finished at 2.20%.
– On Currencies, it looked very much like a case of buy the rumour of strong US employment and sell the fact of slightly weaker than expected but still strong data. Or it could simply be that traders booked profits. Whichever way it looks there is a chance the US dollar has topped for this latest run – BUT NOT longer term.
– This, along with the Chinese data over the weekend, has helped the Aussie dollar rally up to 0.8660 and Westpac thinks it can go a few cents further. Euro is at 1.2476 and the yen is down at 114.32. GBP is at 1.5887.
– On Commodity markets, the weakness in the US dollar has helped gold $30 off its lows to $1,179 an ounce, copper lifted to $3.034 a pound and Nymex crude was up 0.67% to $78.43 a barrel. On the Ags, corn fell 1.08%, wheat dipped 1.06% while soybeans were up 0.15%. On Australia’s bulks, Dec 62% Fe iron ore was up 98 cents a tonne to $75.38 while coal for Dec delivery lost 10 cents to $62.05 a tonne.
On the data front, we get home loan data in Australia and then the super important Chinese data which cynics might say will print well while APEC is in Beijing. Otherwise, it’s quiet on the data front.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Following a relatively flat close on US markets on Friday, we head into the new trading week with quite a few Australian stock charts starting to show signs of possible bearish divergence. If this follows through we could be set for a correction of the recent rally.
Westfield Corporation looks a case in point. A move below Friday’s low would confirm a minor double top pattern. A relatively weak close at some stage in the next few days would also produce a failure swing on the RSI shown below the chart. It could start making lower highs and below the 70% overbought level.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC