– A better night for stocks which were in the black from the get-go. Even the obvious message from the Fed in the FOMC minutes is that QE is ending and the road to the normalisation of rates is at hand. The minutes noted that Fed participants “generally agreed” that its monthly bond purchases would end in October.
– Certainly two-year Treasuries reacted, hitting their highest levels in more than a year. But closing at just 0.5%, it is hardly a bear market for bonds. With US 10-year treasuries closing at 2.55% down 1 point, stock traders aren’t worried – at least today.
– So at the close the Dow was up 79, or 0.47% to 16,986. The Nasdaq rose 0.63% and the S&P 500 rose 9 points to 1,973 for a gain of 0.47%.
– In Europe, the FTSE fell 0.3% to 6,718. The DAX was 0.36% higher at 9,808 while the CAC rose 0.4% to 4,360. In Italy and Spain, stocks rose 0.89% and 0.54% respectively.
– The impact on the ASX has been to see the Futures market pullback from yesterday’s weakness and the SPI 200 September contract up 10 points to 5,423.
– In Asia yesterday, it was an ugly day, but it was a day focused on the previous night’s US trade, so we’d expect a better performance today. That is if Chinese trade data plays ball when it is released at 11am. Yesterday saw the Nikkei open weak but clamber higher to finish down 0.07% but in Hong Kong, stocks fell 1.55% to 23,176 while Shanghai stocks fell 1.21% to 2,039. It seems the weakness might have been on the CPI data which wasn’t bad enough to prompt any further stimulus.
– On Currency markets, the trade continues to confound me with the euro and sterling higher at 1.3641 and 1.7155 respectively. USDJPY rallied as well, which saw the inverse correlation between the euro and the yen that appears to be in evidence most days continue. The Aussie pushed a little higher, along with the Canadian dollar, and sits at 0.9412 this morning.
– On Commodity markets, Iron Ore could not breach important resistance and has reversed overnight with the September 62% Fe falling 90 cents to $95.77 a tonne. Newcastle Coal for September has dipped under $70 a tonne, finishing at $69.95. Copper dropped a cent to $3.24 lb while in great news for global growth, July Nymex Crude fell 1.4% to $101.95 Bbl.
– Gold rallied $7.80 oz to $1,330 and Silver was up 5 cents to $21.14 oz with the big news that a joint bid by Thomson Reuters and the CME is the front-runner to host the new Silver Fix, but the LME hasn’t given up hope yet. On the Ags, Corn and Wheat both lost a little more than 1% while Soybeans rose 0.36%.
On the data front today, Chinese trade and Australian employment will make for a super interesting day in Asia before French CPI, UK trade and the BoE interest rate decisions. Tonight is quiet in the US with the usual Thursday fare of jobless claims but little else.
And now from CMC Markets’ Michael McCarthy is today’s Stock of the Day
As a market guy, I sometimes get annoyed at the dramatic language commentators use. And as a commentator, I’m guilty as well (yes, Virginia, it IS our own faults that most offend us when we detect them in others). However, it is difficult to overstate the drama involved in Navitas’ share market drop yesterday – down 31%, wiping out more than $700 million dollars in market value. In a single session.
Education provider Navitas informed the market that a contract to provide pre-entry courses to Macquarie University will not be renewed beyond 2016. While this is an important contract for NVT, it continues with similar operations on 30 campuses around the globe. Earnings will not be affected for at least two years. The problem is that NVT was trading on a PE ratio more than 30x, largely due to long term growth expectations around 17%. In other words, priced for perfection, making it vulnerable to any earnings miss-step.
Nonetheless, it’s easy to form the view that the sell-off was an overreaction. NVT could be a victim of a temporary “sell first, ask questions later” environment. This may present an opportunity for investors taking the long term view. In fact, a strong local jobs report and good trades numbers could see sentiment turn very quickly – and NVT with it.
Michael McCarthy, chief market strategist, CMC Markets
You can follow Michael on Twitter @MMcCarthy_CMC