– What could have been an appalling end to the week was far more positive with Asian stock market weakness giving way to strength at the US market’s opening, and a real inconsistency between the price action on US stock and bond markets Friday night with both rallying strongly.
– But without a good explanation for why the Dow finished 185 points to the good, the post-hoc reasonings have centred on a possible de-escalation in Russia activities in Ukraine and war games on their shared border. But equally it could have been the big surge in Chinese exports that no one paid much attention to in Asia. But the fact that US 10’s fell to 2.37% and that this stock sell-off has pulled up around the same percentage loss as the last three suggests technical buying and bargain hunting are as likely a culprit as anything.
– Indeed if you ARE technically minded there are a lot of markets from S&P futures to USDSGD which show very long tails (on the daily candlestick) after Friday’s Asian selloff. Maybe the worst is over for this run?
– So at the close the Dow rose 1.13% to 16,445. The Nasdaq rose 36 or 0.83% while the S&P 500 finished at 1,932 up 22.02 for a gain of 1.15%.
– In Europe the FTSE finished at 6,567 down 0.45%. The DAX fell 0.33% to 9,009 and while the open this evening on European markets is likely to be positive after Friday’s US moves the DAX is a long way from recent highs. In Paris the CAC hardly budged, falling just 0.05% to 4,148. In Milan and Madrid stocks rose 0.33% and 0.26% respectively.
– Locally the SPI 200 September futures rallied 37 points after a terrible day locally to close Saturday morning at 5,413.
– On Friday in Asia the Nikkei crashed 2.98% as USDJPY sold off putting a hand brake on Japanese growth at a fragile time for the economy. But Nikkei futures are up 300 points from the lows of Friday. The Hang Seng was down 0.23% while traders in Shanghai took the index 0.29% higher.
– We can largely forget Asian trade on Friday but equally Monday morning Asia is also often a bad lead for the week. So it’s not till US markets trade tonight that we can get a real read on whether Friday night was a solid reversal or just a one-night-wonder.
– On currency markets the US dollar lost the Asian strength as USDJPY moved back to 102. Euro recovered from 1.3340 to close at 1.33 and looks like it is building a base from which it might rally. Sterling was lower closing on the 200 week moving average and looks weak at 1.6796 while the Aussie is off the lows at 0.9330 to 0.9370ish.
– On commodity markets September iron ore futures fell 25 cents a tonne to $94.75 while Newcastle coal for the same month rallied 60 cents to $71.75 a tonne – its highest level since mid-June.
– Nymex crude was up a little at $97.46, gold is at $1,311 while silver sits at $19.92 an ounce. Copper is at $3.18 a pound while on the Ags wheat fell 1.85%, corn dipped 2.17% and soybeans were 0.96% lower.
It’s a very quiet day the data front today, kicking off a fairly quiet week of data. Chinese money supply and new loans are out after the fairly uneventful CPI on Saturday (+2.3% as expected). Japanese confidence is of some interest as is UK retail sales but otherwise it’s a data drought.
And now from CMC Markets’ Ric Spooner, here is today’s stock of the day.
Shareholders in Carsales.com head into Wednesday’s profit report with the stock sitting just above trend line support at $10.85. No doubt shareholders will also be contemplating the ramifications of Friday’s sell off in REA Group.
As well as both being online advertising portals, both these companies both have possible issues with intermediaries in the form of car dealers and real estate agents respectively. The market will be keen to see these issues resolved.
REA went into Friday’s result, priced for perfection at around 30 times 2015 earnings. A combination of minor earnings downgrades and valuation adjustments saw it sold down 8.5% following Friday’s minor miss on profit results
Car Sales has a somewhat lower, but still very attractive growth profile compared to REA. Accordingly, it goes into Wednesday’s result at slightly less aggressive 23 times F15 earnings. While this is lower than REA, it is still the kind of high risk multiple that will require a good result to maintain market confidence.
If Wednesday’s results miss expectation the following chart levels might prove useful
- Support between the 200 day moving average and a horizontal line around $10.50/$10.30
- Resistance formed by the July highs around $11.60.
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