Good morning. Here’s the update you’ve been waiting for.
– Currency markets took the lead again as ‘King Dollar’ surged across the board taking the euro, pound, yen and Aussie all lower. It was relentless buying of the US dollar almost from the moment European traders sat down at their desk and while the buying has slowed in the past few hours, the US dollar is closing the New York day close to its highs.
– There are a number of catalysts which drove the US dollar, including sterling’s Scottish independence ‘Yes’ vote-induced crash, but the fact that the Aussie dollar has fallen more than any, (down 0.89% to 0.9280) suggests that something more is afoot in the world’s biggest macro market.
– One possible explanation is a recalibration of what non-farm payrolls really means for Fed policy, with the release of a San Francisco Fed study suggesting the market being too sanguine on the timing of Fed rate hikes could be a reason. Equally, data last night showing a surge in consumer credit in the US by $26 billion last month suggests that consumers aren’t impacted by lower non-farms and that animal spirits are alive and well in the US, if not here at home in Australia.
– Turning to stocks then and the ructions in Forex were lost on stock traders with small falls across most US and European markets. The Dow finished down 0.15% at 17,111, the S&P dipped 6 points or 0.28% to 2,002, while the Nasdaq was up 0.2% to 4,592.
– In Europe, only the Dax rallied, which makes sense given the strength of German trade data which showed a surge in exports and fall in imports. The DAX closed up 0.11% to 9,758. In the UK, the FTSE was down 0.29% to 6,835 while the CAC fell 0.26% to 4,475. In Milan and Madrid, stocks fell 0.47% and 0.41% respectively.
– Locally, after stocks closed weaker again yesterday, but off their lows for the day, the SPI 200 futures in overnight trade are unchanged for September at 5,578 while December fell 12 points to 5577.
– In Asia yesterday, Shanghai was closed so there was no action there after the interesting Chinese trade data, which showed exports stronger than expected but imports weaker. In Japan, even though GDP fell 1.8% (as expected) in Q2 2014, making the year-on year-rate of -7.1%, the Nikkei managed to rally a slight 0.23% to 15,705.
– On bond markets, things were a little messy with only small 1- or 2-point rises, except for Italian bonds which sold off 5, rising to 2.30%. US 10s finished at 2.47%, Bunds at 0.96% and Gilts at 2.35%.
– On Currencies, the Aussie is at 0.9280, sterling is at 1.6097, USDJPY is above 106 at 106.06 and the euro is at 1.2894.
– On Commodities, Iron Ore had its first rally in a week, up 82 cents to $84.66. Newcastle Coal was 25 cents a tonne higher to $66.35. Nymex Crude dipped marginally, falling 0.16% to $93.14. Copper is up to $3.18 a pound and Gold sits at $1,256, down $US10 an ounce overnight. Silver is at $19.05 and on the Ags, Wheat dipped 0.67%, Corn dropped 2.36% and Soybeans 1.01%.
On the data front, the best read on the economy we get every month is out in Australia today with the release of the NAB Business survey. Home loan data is also out.
The big global news though comes from the UK, with both BoE Governor Carney speaking at 6.20pm AEST and then at midnight the release of the NIESR GDP estimate.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
The market has given a tick to QBE’s balance sheet restructure plans.
The share price has rallied since the announcement on 18 August but has now reached resistance in the form of the 200 day moving average and the late July peak at $11.94. A clear break through this resistance would indicate ongoing confidence and potential for a rally towards the February peak at $13.22.
If you are an Aussie Dollar bear it’s also worth remembering that a weaker Aussie will be a positive for QBE given its international investments.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC