– Stocks in the US eked out a marginal new all-time high after weaker than expected data saw bonds rally into the end of the week and the US dollar come under heavy selling pressure once again. Of particular note was the release of “consumer sentiment which caused the sharpest currency moves during the evening,” Westpac’s New Zealand based strategist Imre Speizer wrote in a note to clients this morning.
– Looking at the data in the US industrial production printed -0.3% in April, against expectations of a 0.1% rise. But it was the slump in consumer sentiment which dropped from 95.9 to 88.6 in May which was the big story. Market expectations had been for a rise to 96 so traders and economists were completely blind-sided by the print.
– This helped US 10 year bonds rally hard to end the week at 2.15%. That’s up just 3 points over the week and 21 points lower than the high for the week at 2.36%. German 10 year Bunds closed at 0.63% down 8 points while rates in Spain, Italy and the UK all rallied hard as well. UK 10’s closed the week at 1.89%, down 11 points. Though that doesn’t mean the bond market rout is over. That’s the view of Westpac’s New York based strategist Richard Franulovich who says we might only be about half way through the Bund selling.
– The bond rally and weak US data helped the Euro back toward the mid 1.14 level. That helps US growth and US companies over the medium term — a fact apparent to European stock traders who sold down stocks in Europe and the UK. Elsewhere on currency markets, forex traders have the Pound still up above 1.57, USDJPY down toward 119 and becalmed within a fairly tight range while the Aussie dollar is around 0.8040ish, lagging the bigger currencies against the US dollar. The Kiwi is down 0.33% this morning to 0.7446 on the back, it seems, of news yesterday that the Government is intervening in the Auckland property market by imposing a new tax on speculators.
Here’s the overnight scoreboard (7.25am AEST):
- Dow Jones up 0.11% to 18,272
- Nasdaq down 0.05% to 5,048
- S&P 500 up 0.08% to 2,122
- London (FTSE 100) down 0.18% to 6,960
- Frankfurt (DAX) down 0.98% to 11,447
- Paris (CAC) down 0.71% to 4,993
- Tokyo (Nikkei) 19,732
- Shanghai (composite) down 1.57% to 4,309
- Hong Kong (Hang Seng) up 1.96% to 27,822
- ASX Futures Overnight (SPI June) up 2 to 5,749
- AUDUSD: 0.8036
- EURUSD: 1.1442
- USDJPY: 119.32
- GBPUSD: 1.5727
- USDCAD: 1.2012
- Crude: $59.71
- Gold: $1,222
- Dalian Iron Ore (September): 426
– On the local market today, after a solid recovery from last week’s lows the bias should be higher as the ASX200 tries to climb back inside the range from earlier this year. Friday’s close at 5,735 is just 10 points below confirmation of a move back inside this range. It’s the level to watch and there is a chance that given ASIC warned property buyers about a bubble in Sydney and Melbourne it might remain solid if the banks come under selling pressure. Of note today will be the listing of South 32, the BHP spin off.
– In Asia on Friday China’s Premier dropped a huge hint that more stimulus is coming when he said “forceful measures” are needed to halt any downward pressure on the economy. That didn’t help Shanghai stocks however, which came under heavy selling pressure in contrast to the rest of the region.
– On commodity markets the increased uncertainty has helped gold end the week above $1,220 for one of its best gains in ages. Dalian iron ore is off the highs for the month but improved from last week’s lows to close at 426.5. Copper is quiet at $2.94/95 a pound while Crude is still holding onto its upward trend, just, at $59.71. It’s very close to a break down so watch this as a key driver for other markets.
– On the data front today RBA Deputy Governor Lowe is speaking this morning but Japanese machinery and industrial production data is out and Chinese house prices will be of key interest. Tonight in the US we get the NAHB index. AND don’t forget that Greece is a risk this week.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
FlexiGroup is not a household name but it’s the engine room behind many of the interest free loans and cards you see advertised by major retailers.
I featured it as a stock to watch a few weeks ago when if formed a base at two AB=CD chart patterns as outlined below.
I thought this stock was worth revisiting today because of Friday’s price action which saw a 5% rally. After this rally the stock is still only trading at around 11 times F16 earnings which looks a fairly undemanding multiple that could easily see further upside. Friday’s big move and strong close suggests this is a possibility.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC