– It was another night of losses in US markets. But I’m not focused on US markets. I’m watching Europe as the DAX plunges back toward 9,000 after trading above 10,000 in the past month. Italian bond rates are also rising and it is becoming clear that a risk rotation is happening and markets are becoming more unstable.
– Of course this has been my hobby horse for some time now and as a follower of both Minsky and Mandlebrot, I believe volatility transitions, and when it does, it becomes sticky – which means options are cheap by my reckoning.
– Anyway, overnight the Dow closed down 75 points to 16,368 for a loss of 0.46%. The Nasdaq fell the same percentage amount to 4,335 while the S&P 500 dipped 10 points or 0.53% to 1,910.
– As highlighted above it was another really poor day in Europe. The ECB’s intransigence in the face of economic weakness is bothering traders especially now that the Russian trade sanctions may actually further subdue growth and confidence.
– At the close, the FTSE fell 0.59% to 6,597 but on the continent losses were larger with the DAX down 1% to 9,039, the CAC fell 1.36% while the peripheral markets in Milan and Madrid were smoked – down 1.94% and 1.63% respectively.
– The impact locally is that the bias on the open for the ASX is down with the September SPI 200 contract off 23 points in overnight futures trade to 5425.
– In Asia yesterday the Nikkei was up 0.48% but the USDJPY is back at 102 and should fix that today. In Shanghai the reversal of the 12 month high gained pace, falling 1.33%. This will suggest to traders that the high for this run is in. In Hong Kong stocks fell 0.8%.
– Things aren’t looking great in global stocks even if they aren’t exactly crashing.
– On bond markets US Treasuries rallied 6 points to 2.41% as the growing instability pushed cash towards a safe haven. German 10 year Bunds echo this sentiment rallying 4 points to an incredible 1.06% with UK 10 year Gilts rallying a similar amount to 2.49%.
– On currency markets the Euro fell but only marginally to 1.3362. Sterling dipped to 1.6834 and the Yen is benefiting from what appears to be safe haven flows and is at 102.05 this morning. The Aussie dollar was hammered after the shock jump in unemployment yesterday but at 0.9270 it hasn’t fallen as much as it might, showing the positive effect of the huge interest rate differential in its favour.
– On commodities markets Nymex crude staged a bit of a rally up 66 cents Bbl to $97.58. Gold rose slightly to $1,313 while silver is at $19.97 oz. Copper was fairly steady at $3.17 oz. On the Ags wheat and corn fell heavily down 1.16% while Soy beans fell 0.63%.
– Iron ore for September delivery fell 55 cents to $95.00 tonne while Newcastle coal managed a rally up 30 cents to $71.15 tonne.
Data today in Australia is dominated by the release of the RBA’s Statement on Monetary Policy at 9.30 but we also get home loans data. Chinese trade is going to be very important today as is German and UK trade tonight. In the US unit labour cost and non-farm productivity will be more important than usual in the current environment.
And now from CMC Markets’ Ric Spooner, here is today’s stock of the day.
So you loved the Rio result and you’re thinking about how far it might rally.
Here are the major chart resistance levels
- Potential downward sloping resistance line around $70 – 6.5% above yesterday’s close
- Horizontal resistance around $72 which has stopped the bulls on 3 occasions since October 2011 – a gain of 8.5%
- Horizontal resistance formed by the 2010 lows at $76.50 – a gain of 15.3%
You can follow Ric on Twitter @ricspooner_CMC
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