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– Glenn Stevens isn’t the best central banker in the world (with Mark Carney) for nothing. He holds that position both because he is overseeing and has overseen the bucking bronco that is the Australian economy, Aussie dollar and interest rates but also because he understand the plumbing of global finance.
– Many have been worried as he left the Aussie dollar to its own devices. But he signaled that when the Fed starts to raise rates we’ll have a very different market environment and a lower dollar. It seems with the pick-up in US economic strength and the strength of the US dollar that ever so slowly he is being, or is about to be, proved right.
– Last night the Aussie dollar was smashed along with Iron Ore and Coal, Gold dipped below $1,250 at one point, Crude is below $93.00 and Copper tanked 6 cents to $3.10.
– The common denominator is a strong US dollar and while its strength will ebb and flow, it seems a move is afoot for concerted strength which will weigh on markets around the globe.
– Turning to the US overnight, and even with the big Apple announcements, stocks were lower. Apple fell 0.4% on the day which isn’t much but it had been up 4% at one stage. On the Indices, the Dow closed 97 points lower at 17, 014 for a loss of 0.57%, the Nasdaq was off 0.88% at 4,552 and the S&P 500 lost 14 points or 0.68% to close at 1,988.
– In terms of data, in the US the small business NFIB optimism index was released, printing 96.1 – the second highest level since 2007, according to our BI US colleague Myles Udland.
– In Europe, stocks were also lower across the board with the FTSE not too spooked by BoE Governor Mark Carney intimating that rates could rise soon. They closed down 0.08% at 6,829. On the continent, the DAX was 0.48% lower at 9,711, the CAC dipped 0.51% to 4,452 while stocks in Milan and Madrid fell 0.68% and 1.36% respectively.
– On Futures markets, locally after a reasonable performance in the Physical ASX yesterday the SPI 200 September and December futures both fell 17 points to 5586.
– In Asia yesterday, Shanghai was flat at 2,327, the Hang Seng dipped 0.2% to 25,190 and the Nikkei rose 0.28% to 15,749. Market focus today will be on new loans in China and machinery orders in Japan.
– On Bond markets, traders are voting with their feet a little, as US 10-year Treasuries up 4 points to 2.51%. German 10-year Bunds rose 5 points to 1% while Italian and Spanish bonds rose 8 and 12 points respectively.
– Turning back to Currency markets, the Aussie is under pressure at the bottom of the range, sitting at 0.9203 but just holding above the 200-day moving average at 0.9180. Euro buyers are back after the monster sell-off recently and it sits at 1.2938 this morning while GBP is at 1.6103 and the yen is at 106.23.
– On Commodities, Iron Ore and Coal were both poleaxed overnight. September Iron Ore fell 96 cents a tonne to $83.70 but December futures lost $1.76 to $82.24. The big miners are grinding smaller miners into the dust it seems but they might need to be careful what they wish for. December Newcastle Coal dropped 90 cents to $66.75 a tonne. Nymex Crude sits at $92.75, Copper dropped 6 cents to $3.10 a pound and Gold is at $1,256. On the Ags, Wheat fell 0.82%, Corn lost 1.15% and Soybeans were 0.28% lower.
On the data front today, we get the Westpac consumer sentiment index for September, the Chinese data noted above and then tonight, UK inflation hearings.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
James Hardie Industries
Last night’s Aussie dollar weakness brings ASX stocks with large overseas investments into focus. A weaker currency increases the $A value of both their offshore profits and investments.
Building products company, James Hardie falls into this category. About 77% of its sales are in the US and Europe.
In these days of low volatility and relatively shallow corrections, the 38.2% Fibonacci retracement level has been the final destination point for a lot of stock market pull backs in recent times. After a miss with its latest quarterly profit result, the James Hardie share price is showing signs of forming a base around the 38.2% retracement level.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC