Here’s your morning market update.
– The weak Chinese export data released over the weekend reverberated around markets over the past 24 hours with the Shanghai exchange down 2.86%, the Nikkei off 1% and the ASX 200 down 0.9%. Europe was also lower and the US likewise more subdued than usual. Copper also lost another 1.3%, with the March contract dropping to $3.12 lb.
– The key here is that the uncertainty around the Chinese data and the distortions that have been sourced in currency speculation leave the market confused as to the true state of growth in the world’s second biggest economy. We know that the official target is for growth of about 7.5% this year but we also know that yesterday the RMB fix was weaker again, suggesting that officials will continue to target currency speculation. This is the right policy for the long-term structure of the Chinese economy but it will muddy the Chinese economic waters for a while. So it’s no surprise that mining shares and the Aussie dollar are also down on the day.
– So at the close the Dow is 0.4% lower, the Nasdaq is off 0.1% and the S&P 500 is off just 1.7 points to 1876.3.
– In Europe, the FTSE and DAX fell 0.35% and 0.91% respectively but the CAC rose 0.10% while stocks in Milan and Madrid were up 0.58% and 0.30% respectively.
– On the ASX overnight, the March SPI 200 futures contract is down 5 to 5416.
– On global FX markets, the euro didn’t react to increased pressure on the ECB and its head Mario Draghi to deal with the ongoing threat of deflation after the German Institute for Economic Research called for 60 billion euro of bond purchases each month to avert a Japanese style trap. Euro is fairly stable day-on-day at 1.3875, having traded a fairly tight range.
– Elsewhere on global FX markets, sterling is off 0.47% to 1.6638 after Charles Bean from the BoE warned about further GBP appreciation. The yen has lost 0.21% with USDJPY back at 103.19 while the Aussie is down 0.42% to 0.9015.
– On commodity markets, Nymex crude lost 1.42% to $101.12, reflecting the concerns over China. Gold was up marginally at $1340 but more than half a per cent of the low of yesterday. Copper, as noted above, is down and the Ags we watch were all lower, with Corn down 1.87%, Wheat off 0.19% and Soybeans down 2.62%. Elsewhere, Oats fell a whopping 5.8%.
On the data front today, in Australia the NAB business survey will be released at 11.30am, the Bank of Japan releases its interest rate decision this afternoon while tonight we get German trade data, UK industrial production and inflation report and the US NFIB business optimism index, Redbook index and wholesale inventories.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
IAG found itself wallowing near 52 week lows again yesterday.
From a chartist’s point of view this makes things interesting. Another test of the well-defined support line is in play.
While there looks a lot of room for something to ugly to happen if this support is broken, the fact that the slow stochastic oscillator is oversold might sound a note of caution for potential sellers.
In the absence of any earth-shattering company news, a move below the support could turn out to be a bit of a false break and a potential opportunity for buyers happy with this stock’s dividend paying capacity.
Ric Spooner, Chief Market Analyst CMC Markets
You can follow Ric on Twitter @ricspooner_CMC
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