Your Friday the 13th Horror Story – unless you are long Aussie dollars.
– It’s only been two down days and US markets are still not too far from all-time highs but the World Cup might have ushered in a period of disinterest which could see stocks finally start to have their northern summer swoon.
– At the close, the Dow was off 110 points to 16,734 for a fall of 0.6%, the Nasdaq fell 0.8% to 4,298 and the S&P 500 had a fairly substantial 14 point or 0.71% drop to 1,930. The data didn’t help with retail sales missing (0.3% v 0.6% expected) and jobless claims printed higher than expected at 317,000.
– Clearly the Iraqi re-insurgency weighed on markets along with the disappointment of the data in the US. In Europe, stocks were flat to down for the most part. The FTSE was 0.06% higher to 6,843, the DAX fell 0.11% to 9,939 while the CAC was largely unchanged at 4,554 down 0.02%. In Milan, stocks dropped 0.27% while the IBEX in Madrid rose 0.13%.
– On Bond markets, the US digested $13 billion of 30-year issuance and the 10s finished unchanged at 2.60%. In Europe, German Bunds rallied 1 point to 1.39% and Gilts sold off one to 2,72%. But in a sign that the equity sell-off could be more than just the vanilla fare we are used to, Spanish 10s sold off 6 points, rising to 2.70% while Italian 10s rose 3 pips to 2.82%.
– So the wash-up is that the ASX is down 31 points in overnight futures trade with the SPI 200 back at 5400 bid. It’s likely to be a tough day for miners with Iron Ore crashing through recent lows overnight. On the bond boards, the 3s were up 1 point to 97.16 while the 10s rose 3 points to 96.21.
– Selling Europe’s periphery, buying Aussie bonds and the Aussie dollar up. A little risk is being taken off the table. I’m thinking of Kenny Rogers “The Gambler” – you got to know when to hold em, know when to fold em….
– In Asia yesterday, the Nikkei was down 0.63% to 14,974 after the USDJPY dipped back below 102. The Hang Seng lost 0.35% to 23,175 while the Shanghai composite dipped 0.14% to 2,052. Data-wise, the Chinese retail sales will provide some interest today, as will the BoJ’s monetary policy decision.
– On Currency markets, the euro stabilised, rising back to 1.3555, sterling ripped higher after comments from BoE governor Mark Carney that implied a rate hike is not too far away. USDJPY sits at 101.74 and the Aussie is back above 94 cents at 0.9423.
– On Commodity markets, Iron Ore is crashing again with the September contract losing an incredible $2.25 tonne to $90.58. Thermal coal out of Newcastle was unchanged at $72.55 for the September contract but the big news – huge news – and a handbrake on global growth, is the Iraqi conflict induced spike in Nymex Crude. The June contract rose $2 to $106.81 Bbl. Gold picked up a per cent as well and sits at $1,272 while Silver is still at $19.05 oz. Copper fell back to $3.02, a long way from this month’s high at $3.15. Soybeans crashed 2%, Corn rose 0.68% and Wheat fell a similar amount.
On the data today, China and Japan will hold most traders’ interest before CPI in Germany and Italy along with EU employment and trade. In the US, PPI is the key highlight.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
The next few days promise to be interesting for stock traders. The index is approaching support, drifting down under the weight of a number of concerns including the iron ore price. With the situation in Iraq emerging as a real concern and now overlaying previous issues, support looks like being tested.
If there is to be a break of market support, AMP is the sort of stock that will go with it. Its share price has been grinding higher in a low momentum rally since March. This has taken the form of a trend channel with the 40 day moving average running along its support. A clear break of this support would set up for a deeper correction than we have seen in recent months.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC