It’s Monday! Get in!
– Markets in the US had another win on Friday after two days under pressure. What drove the rally is difficult to pinpoint given the economic data was on the weaker side but maybe the PPI fall of 0.2% in May has counterbalanced the fear that BoE Governor Mark Carney delivered with his interest rate warning earlier in the week. In other data, the Uni of Michigan consumer confidence reading dropped to 81.2 against the 83 expected from the market.
– In the end, the Dow rose 41 for a gain of 0.25% to 16,776. The Nasdaq was up 0.3% to 4,311 while the S&P 500 finished up 1,936 also for a gain of 0.3%.
– In Europe, stocks lost momentum with the FTSE down 0.95% for its third daily loss and a break out of the May range. Further losses seem likely. In Frankfurt, the DAX lost 0.26% and the CAC lost 0.25%. In Milan, stocks hardly budged while in Madrid the market rose 0.23%.
– In Asia Friday, it was a positive day after the solid 12.5% yoy retail sales growth just beat the 12.1% expected and the BoJ left rates and its bond buying program unchanged after its monetary policy meeting. The Nikkei was 0.83% higher to 15,098 long with the USDJPY rally. The Hang Seng rose 0.62% to 23,319 and in Shanghai, stocks rose 0.94% to 2,071. It’s a quiet day in Asia today with only the BoJ economic survey out.
– On global bond markets, the UK sell-off continued with 10-years rising another 3 points to 2.75%. A loss of 1.12% in capital value helps explain some of the FTSE’s weakness. In the US, rates rose 1 point to 2.61% while on the continent, the German and Italian CPI prints of -0.1% for May helped drive rates lower with Bunds down 2 to 1.37%, and Italian and Spanish 10-years falling 3 and 4 points respectively to 2.79% and 2.66%.
– So the wash-up of all of this is that the ASX looks set for a fairly flat open with SPI June futures up 1 point to 5405 and September futures up 4. The Iron Ore price was down again however, so we’ll see the impact on the miners in trade today. On the Bonds, the September 3s rose a point to 97.105 (2.895) while the 10s rose 1.5 points to 96.215 (3.885%).
– On Currency markets, the Aussie has slipped back below 94 cents to 0.9390 this morning. The euro sits at 1.3537 while sterling traded above 1.70 for a time last week before falling back below the figure and it sits at 1.6970 this morning in early Asian trade. USDJPY is back just above 102 at 102.05.
– On Commodities, Iron Ore September futures fell another 50 cents a tonne to $90.08 while Newcastle Coal for September rose 30 cents to $72.85 tonne. Nymex June Crude leapt above $107 Bbl at one point before falling back but still ended up 0.36% to $106.77. Eyes remain on Iraq. Gold sits at $1,274 with Copper at $3.03 lb as traders continue to eye corruption and collateral probes in China. On the Ags, Corn was up 0.68% after traders bet that the crop forecasts were too optimistic. Soybeans rose 0.74% and Wheat was up 0.13%.
On the data front today, it is quiet in Asia before the EU CPI data and New York Empire Manufacturing, industrial production and NAHB housing market index are released in the US.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Sonic looks like remaining the subject of changing market views as the politics of the Medicare co-payment play out in the Senate. This is the kind of situation that often creates opportunity for technical traders. In these circumstances “chart levels” can become focal points that provide an insight into changing market opinion.
Sonic’s chart provided insight into market concern when it dropped out of a short term trading range around the time of the budget. After a brief retest rally, the downtrend resumed and has now arrived at the next test of sentiment from a chart point of view. This consists of the bottom of a long term trend channel as well as the 200 day moving average. A break under this support could see a retreat to the $16.30/$16.00 level. That support zone includes the 38.2% retracement of the last major rally.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC