Here we go.
– It would have been a remarkable outcome if we had have walked in this morning with news that stocks in Europe and the US had risen. That’s because with the FOMC so close this week, traders were always going to be worried about the when and how fast of tightening. Add in a dose of failed Greek talks and it’s no surprise that global stocks are a sea of red this morning.
– Europe has been worst hit with ECB president Mario Draghi’s warning that Greece could drag the EU into “uncharted waters” weighing on sentiment and markets. Certainly he also gave a nudge to the politicians by saying that whatever happens is a political decision but overall there was a deep sense of foreboding on European markets. Stocks were all off more than 1% while peripheral bond markets like Spain and Italy sold off heavily.
– Data hardly matters so close to the Fed. But the miss by industrial production (-0.2% against +0.2% expectations) and the big fall in the New York Fed manufacturing index from 3.09 to -1.98 is a good reminder the US economy is still far from the pink of health. But it is increasingly clear in the jobs data and in the bounce in the National Association of Home Builders index from 54 to 59 in June that neither is the economy in need of 0% interest rates.
– One thing worth looking at if you haven’t seen it this morning is this piece by Business Insider co-founder Henry Blodget on the chances of a crash. It’s an interesting look in the rear view mirror with an eye on the road ahead.
Here’s the overnight scoreboard (7.21am AEST):
- Dow Jones down 0.6% to 17,791
- Nasdaq down 0.42% to 5,029
- S&P 500 down 0.46% to 2,084
- London (FTSE 100) down 1.1% to 6,710
- Frankfurt (DAX) down 1.89% to 10,984
- Paris (CAC) down 1.75% to 4,815
- Tokyo (Nikkei) down 0.09% to 20,387
- Shanghai (composite) down 2% to 5,062
- Hong Kong (Hang Seng) down 2.14% to 5,221
- ASX Futures Overnight (SPI June) -3 to 5534
- US 10 Year Bonds -4 points to 2.36%
- German 10 Year Bonds down down 1 point to 0.83%
- Australian 10 year bonds +3 points to 3.05%
- AUDUSD: 0.7763
- EURUSD: 1.1278
- USDJPY: 123.42
- GBPUSD: 1.5596
- USDCAD: 1.2320
- Crude: $59.61
- Gold: $1,186
- Dalian Iron Ore (September): 445
– The local market recovered from acute early weakness which had the ASX 200 down near 5,490 around 10.30am yesterday. From there it rallied all day to be down just 6.5 points, around 0.1%, lower on the day. The lead from offshore for the day is again poor but yesterday’s price action shows that buyers haven’t given up on Australian stocks entirely just yet. Support looks likely around 5,490 again today and only a break of that level would get the bears excited.
– In Asia yesterday, Shanghai dipped back 2%. It’s still in nose-bleed territory after stocks have trebled and are now worth $6.7 trillion more than a year ago. But Reuters reports this morning that it might now be okay to “call time” on the monster share run. Reuters reports that “a top Chinese broker says enthusiasm at a recent conference was markedly tempered following the 100+ pct performance of some mutual funds YTD”. Maybe it is time for a pause that refreshes.
– On forex markets the most remarkable thing is happening. The euro is rallying even as Greece heads toward default and maybe even exit. That would have been incomprehensible only a few months back. NAB’s co-head of currency strategy Ray Attrill is a bit perplexed about this and wondered this morning “whether complacency/belief an 11th (or 13th?) hour political deal will be struck on Greece (isn’t it always?) or that Greek default and potential Grexit will be a good thing for the rest of the Eurozone, is hard to say.” Indeed it is. Attrill adds that other markets aren’t so relaxed, which could be a warning to forex traders. As it stands though, the Aussie, euro, and sterling are all stronger this morning.
– On commodity markets crude fell a little in mixed trade, gold is up a few dollars to $1,185 and Dalian iron ore for September dipped to a still-high 445. Interestingly, copper lost 1.5% to $2.66. We’ll need to watch that one.
– On the data front today we have a speech from Guy Debelle, assistant governor (Financial Markets) at the RBA early and then we get the Minutes to the last board meeting at 11.30am. German CPI is out tonight as is the CPI release for the UK. Retail sales for Britain are also released and then the German and EU ZEW surveys will be released. Housing starts and building permits are important in the US.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Ten Network (TEN.ASX)
Yesterday, Ten announced a capital raising and plans to form a closer alliance with Foxtel. It will raise up to $154m by issuing shares at 15c. Half the new equity will come from Foxtel which will increase its stake in Ten to 14.99%.
The new capital will be used to pay down debt. The strengthening of Ten’s balance sheet should put it in a better position to buy attractive programs.
Another feature of the deal is that Ten will take a stake in Foxtel’s sales company. This could put in a better position to obtain sports coverage, with the possibility of integrated deals involving Ten and Foxtel. For example, the main parts of a sport season/event might be shown on free to air but with the rest on pay TV.
Whether the ACC is happy with this arrangement remains to be seen. The deal is conditional on its approval and the proposed capital raising offer will not take place until September.
If you are thinking about trying to buy into a pull back after the dust has settled on this announcement, the 22.5-24c zone could prove to be a support area. The bottom end of this support is bounded by the 40 week moving average and mid-April peak.
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