A big night sets the scene for today. Here’s what happened:
– The Fed minutes were the key release overnight and the dovishness they showed ignited a rally in stocks as traders recalibrated their timing for a rise in US interest rates. The US dollar was sold, helping the Aussie and others rally and the ASX 200 is set to open higher again today with the June SPI 200 Futures on the ASX leaping 42 points in overnight trade.
– At the close, the Dow had gained 1.11% or 181 points to 16,437. The Nasdaq was 1.73% to 4,184 and the S&P 500 rose 20 points to 1,872.
– This rally could be the antidote that the Nikkei needs after another poor day yesterday where it lost 2.10% as USDJPY languishes below 102. Elsewhere though, Shanghai was a little higher, up 0.32% unmoved by the World Bank’s slight revision of expected growth in 2014 from 7.7% to 7.6%. Either way, it’s higher than what many pundits fear. The Hang Seng was up more than 1% and eyes both in Hong Kong and mainland China will today turn to the release of Chinese trade data which is a bellwether for expectations about the path of Chinese growth – but also prone to invoice rigging. It is unlikely not to be a market mover. In Tokyo, foreign investment and machinery orders are out and the Bank of Korea will deliberate on interest rates.
– In Europe, stocks also rallied, although less so than the US with the FTSE up 0.69% to 6,636, the DAX up 0.16% to 9,506, and the CAC 0.41% higher at 4,443. In Milan and Madrid, stocks were up 0.23% and 0.04% respectively.
– On Currency markets, the Fed’s signals ignited a big US dollar sell-off, with euro now 1.5 cents higher than a couple of days back at 1.3851. It’s all about the Fed because the euro ignores both ECB Governing Council member Josef Bonnici and Spanish PM Mariano Rajoy saying the currency is too high. So two things seem to be occupying traders minds – first, they have not been averse to using a weaker US dollar to fire the economy and second, they show that they are still very worried about the economy. Traders took both of those and ran with it. The pound is up at 1.6788 while the Aussie was buoyed by solid data and a weak USD and is at 0.9380 this morning. USDJPY stabilised and sits at 101.96.
– On Commodity markets, US dollar weakness also had an impact. Crude rallied to $103.45 Bbl, Gold is at $1310 oz and Copper $3.07 lb. On the Ags, Corn fell 0.94%, Wheat dropped 1.74% and Soybeans rose 0.86%.
On the local data front, arguably Australia’s most watched data point will be released at 11.30am when the ABS announces the employment change and unemployment rate in March. The market is looking for a rise of 5,000 jobs but Westpac is on the record saying they think a fall of 20,000 is coming. In China, trade is very important and then French CPI tonight will help guide ECB interest rate expectations. The BoE is out as well with their decision on rates before initial jobless claims in the US.
Here is today’s Stock To Watch from CMC Markets chief market analyst Ric Spooner
For readers wanting to take a considered look at the Australian retail landscape the morning after the David Jones news, I thought the Myer chart might be of interest.
This chart took on a bearish hue when it broke triangle support as the stock went ex-dividend. This support then became potential resistance. The market gapped above this yesterday but was unable to get past the 40 day moving average around $2.51.
It’s not uncommon for price to make a correction back into the body of a triangle after the initial breakout. At this stage, this looks like what might be happening here. Apart from the 40 day moving average, the gap created by selling following Myers profit announcement also provides potential resistance. A move to fill that gap before the downtrend resumes would not surprise.