Good morning. Here’s the latest buzz.
– The US markets struggled all day bouncing between positive, flat and then negative territory where it ended the day. European markets, however, were much more positive with multiple markets on the continent up more than 2%. In Asia yesterday, things were mixed. Futures trade last night was positive across the region which helped the ASX June SPI 200 futures eke out a 3-point gain to 5,788.
– Of course, if you are long the DAX or CAC you’ll think that’s the big story. But for mine it is the continuing crash of the euro. Last night the single currency dropped 1.45% to 1.0542. That’s a little better than the 1.5009 low but still a long way from the 1.0716 high. Key to the euro’s fall, and DAX/CAC rally, is that the ECB’s QE is driving the selling of euro which should make EU firms more competitive. It’s the same strategy the RBA is pursuing for the Aussie and Australian economy except in the EU the ECB QE is a turbo-charger for the euro’s 13.94% fall over the past three months.
– But the Aussie dollar is doing well for the economy, too. It’s down 8.36% over the past three months which is a good thing, as it will change the consumption preferences of Australians within the economy. That was the message from RBA assistant governor Christopher Kent yesterday and the line the RBA has taken for some time. So the Aussie below 76 cents overnight is a good thing.
– On the data front yesterday, the Chinese industrial production, retail sales and urban investment all undershot. In the UK, industrial production for the month fell 0.1% against expectations of a 0.2% increase. That hurt the pound, which fell 0.86% to 1.4936. Data was light elsewhere but the RBNZ has left rates on hold this morning.
– Here’s the overnight global stock market scoreboard:
- Dow Jones down 0.16% to 17,635
- Nasdaq down 0.2% to 4,850
- S&P down 0.2% to 2040
- London(FTSE 100) up 0.29% to 6,722
- Frankfurt (DAX) up an amazing 306 points for a gain of 2.66% to 11,806
- Paris (CAC) up 2.38%, 116 points to 4,998
- Tokyo (Nikkei) up 0.32% to 18,724 (more stimulus coming it seems)
- Shanghai (Composite) up 0.15% to 3,291
- Hong Kong (Hang Seng) down 0.75%, 179 points to 23,718
- ASX Futures (SPI June) up 3 points to 5,788
– The ASX found support yesterday and the consolidation of the recovery off the low is important in helping influence the tone in trade today. Obviously the fundamentals are well known but on a technical basis, traders are clearly watching the lows for this year as they will be watching the more recent lows as resistance. As you can see in this chart from my Go MarketsAsian Trading Wrap yesterday, we now have some fairly important technical levels to watch. I had a trading target of 5,740, so 5,744 yesterday satisfies this within a usual tolerance. That means a break of 5,740/45 would be a huge signal for another dip. Only if it breaks though.
– One thing to note on stocks at the moment is that the market is clearly signalling that it has no fear of an imminent crash of funk in stocks. Looking at the VIX on the S&P 500 shows it rose 1.62% last night. But that only takes it to the fairly subdued level of just 17.20. That should be a comfort but it also highlights the potential risks associated with a more hawkish Fed next week.
– On rates markets, the ridiculousness in German Bunds continued and they closed down another 2 points at 0.17%. US 10s fell to 2.11%, while in the UK, rates rose 2 to 1.85%.
– On commodity markets, Nymex crude is at $48.32, gold dipped $6.30 to $1,153.80 while copper is at $2.6085. On the bulks, June iron ore was only off marginally, losing 14 cents a tonne to $56.22 while Newcastle coal futures for June fell 45 cents to $57.85.
– On the data front today, we have Australian employment out at 11.30am AEDT. The market is looking for another 15,000 new jobs to be created and the unemployment to dip to 6.3%. Elsewhere, German CPI is out along with inflation for France and Spain. UK trade and EU IP are also out. In the US, retail trade is the big one tonight.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Jobs will be front of mind this morning with Australia’s employment statistics due at 11.30am. That prompted me to have a looks at Seek’s chart.
Interestingly, Seek is drifting back towards the bottom of a well-established trend channel. The 61.8% Fibonacci retracement level is just below that and might be something to bear in mind if price flicks below the channel.
In the bearish scenario, where price shows no sign of rejecting this support but just keeps falling, the 78.6% retracement level around $15.98 will be worth watching.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC