Good morning. Here’s what’s happened so far.
– A most unremarkable night’s trade really. That’s unless you were short sterling against the US dollar because a rally of more than 1 cent came out of nowhere. The other excitement is that the ECB started its QE program which helped European bonds rally. German Bunds, which are already at record lows, rallied 8 points to 0.27%. That is an amazing 23% capital gain for bond holders who were holding Bunds the day before. Other European bonds rallied as well and even the US 10s fell 6 points to 2.19% for a capital gain of 2.45%.
– Turning now to Shanghai yesterday where there was a most amazing turnaround. After initial weakness on the back of big falls in brokerage houses on the back of the possible granting of dealing licenses to banks, the market turned around for the same reason it sold off. Yep, once traders had sold down their holdings in the broking houses they decided to chase the banks higher. The market moved through a 103-point range on the day. After an early low of 3,199 (down 42 points), the market rallied back to a late close at 3,302 for a gain of 61 points. The Hang Seng recovered along with Shanghai but just couldn’t get back into the black, closing down 0.17% at 24,123. The Nikkei didn’t like the downgrade to GDP, which shows a big loss of momentum in the Japanese economy.
– Wall Street was more positive after Friday’s weakness in what was a day of light data. Cleveland Fed President Loretta Mester said the economy is strong enough for rate rises this year but she doesn’t know when (she is a non-voter this year). But that’s widely expected and didn’t faze stock traders who took the Dow, S&P and Nasdaq all higher.
– Here’s the overnight global stock market scoreboard:
- Dow Jones up 0.78%, 139 points to 17,996
- Nasdaq up 0.3%, 15 points to 4,942
- S&P up 0.37%, 8 points to 2,079
- London(FTSE 100) down 0.52% to 6,876
- Frankfurt (DAX) up 0.27% to 11,582
- Paris (CAC) down 0.55%, 4,937
- Tokyo(Nikkei) down 0.95% to 8,791
- Shanghai (Composite) up 61 points, 1.88% to 3,302
- Hong Kong (Hang Seng) down 0.17% to 24,123
- ASX Futures (SPI June)down 5 to 5,821
– Locally, the impact on the SPI 200 was very interesting. Most important for the day’s trade here in Australia was that the March futures rose 12 points. But June 2015 fell 5 points. That’s suggestive of some enduring doubts about the current rally. One interesting thing highlighted by Akin Oyedele from BI US this morning is that, “As valuations continue to climb, investors have been asking Goldman’s David Kostin for trading strategies. He recommends stocks that offer investors cash through buybacks and dividends, stocks on the Nasdaq 100, and stocks on Tokyo’s Stock Price Index (TOPIX).” Now that’s for US investors but there might be some pointers for Australian traders as well.
– On currency markets, the Aussie dollar dipped below 76 cents yesterday but recovered with the Shanghai stock market. The AUDUSD ran all the way to 0.7733/38 (former support) before the sellers entered the market once again. The Aussie is at 0.7705 this morning. Euro is languishing at 1.0852, sterling is at 1.5127, the CAD is at 1.2604. USDJPY is up near the January highs at 121.14 after a run at 121.40 last night.
– On commodity markets, gold is still struggling at $1,166, copper rose 2% to $2.665 and crude is a little higher at $49.97. The rally in oil prices will not last. That’s according to Goldman Sachs. On the bulks, iron ore rose 64 cents to $57.43 a tonne. Newcastle coal for June dipped 15 cents to $58.30.
– On the data front today, we have the ANZ weekly consumer confidence data before the Chinese CPI release for February. Otherwise it is a bit of a light night, with BoE Carney’s speech at 1.30am the highlight.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Amcor’s stock price is to some extent tied to the Aussie dollar. Much of its revenue earned outside Australia, meaning its $A share price benefits from a weaker Aussie or vice versa.
From a technical point of view, momentum indicators are suggesting the possibility of a short term peak in the stock price. The last minor trend peak showed strong momentum, pushing up above the upper Bollinger Band. This is the light blue upper band on the chart below and is a measure of standard deviation or variance from a mean value.
However, if Amcor makes a second trend peak in the near future, it will be below the upper Bollinger band. This will indicate a lower standard deviation or variance. It will also be a double top like pattern with the 2nd peak a close to the first one.
This would all amount to a picture of a double top and declining momentum and would set up for a potential downward correction in this stock.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC