Good morning. Here’s what you need to know so far:
– The end of year Santa rally has been aborted over the past few days with more data out of China yesterday highlighting that the economy is weakening. Yesterday, Chinese CPI for November was released showing a fall in prices of 0.2% against expectations of an already moribund flat result. This took the year on year increase in CPI 1.4% from 1.6% last month while Producer Prices fell 2.7% year of year and acceleration from last month’s -2.2% pace. Readers know I’m a believer in no price pressure and falling prices reflect falling demand, so China is slowing and slowing materially.
– Certainly that is the sense that traders are getting as well but with very different results in Shanghai to the rest of the world. In Shanghai, stocks ripped 2.93% higher showing you can’t keep a good bubble deflated. In Europe and so far, in the US, however, the weakening Chinese economy and continued weakness in oil is weighing heavily on stocks and sentiment.
– Speaking of oil, OPEC has reduced its forecast for demand in 2015 to just 28.9 million barrels a day which Tomas Hirst from BI UK says is the lowest level since 2002. You can read his story here.
– At the close, US stock markets are all down. I might add, the technicals for the S&P look terrible.
- Dow Jones down 1.5%, 271.4 points to 17,529.8
- Nasdaq down 1.8% to 4,682.7
- S&P 500 down 34.1 points to 4,682.7 for a loss of 1.6%
– European Markets except for Germany were lower overnight with the spectre of a Greek default rising again. Investors, fearful of losing their shirts, have driven short-term rates above long-term rates in Greece. A default is of course a default but nearer maturity tends to increase faster than longer bonds when people fear default, so Greek 3s at 9.85% and 10s at 9.025% tell us what traders are worried about.
So, at the close.
- London(FTSE 100) down 0.45% to 6,500.
- Frankfurt (DAX) up, just, 0.06% to 9,800.
- Paris (CAC) down 0.84% to 4,228.
- Milan (FTSEMIB) down 0.89% to 19,218. 1
- Madrid (IBEX) down 0.62% to 10,397
– Locally, at 6am AEDT, the SPI 200 futures traders have followed up yesterday’s fall with another dip overnight, with the March contract off 27 points to 5,180. Levels to watch are 5146 and 5085 on the futures. Here’s a chart.
– In Asia yesterday, the Nikkei hated the stronger yen but Shanghai had a big surge after lunch as the weak CPI and deflation in PPI raised hopes of more stimulus from the PBoC.
At the close:
- Tokyo (Nikkei Average) down 2.25% to 17,413.
- Hong Kong (Hang Seng Index) up 0.17% to 23,525.
- Shanghai (Shanghai Composite Index) POP, no wait, BOOM – up 2.93% to 2,940.
– On currency markets, the Aussie isn’t falling, which is a sign to Morgan Stanley’s head of FX Strategy that the US dollar is coming under pressure. Euro is breaking up this morning as I write – trading above its downtrend from the October higher for the first time in those two months. It’s currently trading at 1.2442. The yen is also stronger at 118.53 and sterling is atop 1.57 at 1.5707. The Aussie is lagging, and getting creamed on the crosses, but is holding its own against the US dollar and sits at 0.8286 this morning.
– On Commodities, oil has tanked again, down close to $3 for a fall of 4.67% to $60.84 a barrel. Copper was at $2.92 a pounds and gold is at $1,229. On the Ags, it was all red with corn off 0.59% while wheat and soybenas dipped 1.75% and 1.88% respectively. On the bulks, iron ore was quiet with March at $67.83 a tonne while Newcastle coal for the same month was unchanged at $62.65 a tonne.
On the data front today, Australia’s extremely volatile but super important employment report is out at 11.30am AEDT today. The market is looking for +15,000 jobs and unemployment at 6.3%. Tonight we get German and French CPI, then US export and import prices followed by the super important retail sales in the US.