– Shanghai was hammered yesterday afternoon but that didn’t worry stock traders in Europe or the US who managed to rally into the close. That’s left all of the major markets we follow higher. All except the FTSE, which dipped just 0.01% on the day. That’s provided a great lead for the ASX today. June SPI 200 futures were up 47 points last night. So it should be a better day.
– The stock market performance is interesting and impressive in the context of the Greek tragedy that continues to unfold. The FT’s Martin Wolf has summarised the mood in an article warning the EU “Divorce Greece in haste, repent at leisure“. He recognises the parties might have backed themselves into an inevitable default and Grexit but adds:
Right now, however, the aim must still be to cool down and secure a deal. Yet, in the current mood of anger and recrimination, reaching one now seems ever more unlikely. That would not be the end of the story, however. Europeans will be unable to walk away. Whether Greece stays inside the euro or leaves, much the same challenges will arise. The Europeans would still have to admit that they would not get much of their money back; and they would still have to help avoid a Greek collapse.
As usual he’s on the money.
– The major impact of the Greek mess was on bonds and the Euro. The Euro was lower but at 1.1250 is still doing impressively well. I wondered what was holding the Euro up in my Go Markets afternoon report yesterday. “Could it be that forex traders believe some deal will be done or is there a recognition that after the dust settles Europe with Greece is a stronger zone and a stronger currency. Could it be that even with the Fed meeting tomorrow and probably the first rate hike in three months the Euro can’t lose this week?” Logically the answer has to be no but the price action in favour of the Euro is far stronger than it should be. At least we’ll know what the Fed is thinking by this time tomorrow.
– Bonds are down as a bit of fear and a big fall in US housing starts (-11.1% from an upwardly revised 1.165 million in April to a 1.036 million annual rate in May) gave traders an excuse to buy. US 10’s are back at 2.31%, german bunds are at 0.8%, Italian and Spanish bonds rallied and UK 10’s are back at 2%.
Here’s the overnight scoreboard (7.32am AEST):
- Dow Jones up 0.64% to 17,904
- Nasdaq up 0.51% to 5,055
- S&P 500 up 0.57% to 2,096
- London (FTSE 100) down 0.01% to 6,710
- Frankfurt (DAX) up 0.54% to 11,044
- Paris (CAC) up 0.51% to 4,839
- Tokyo (Nikkei) down 0.64% to 20,257
- Shanghai (composite) down 3.44% to 4,888
- Hong Kong (Hang Seng) down 1.1% to 26,566
- ASX Futures Overnight (SPI June) +46 to 5571
- US 10 Year Bonds -5 points to 2.31%
- German 10 Year Bonds down 3 points to 0.80%
- Australian 10 year bonds +4 points to 2.98%
- AUDUSD: 0.7749
- EURUSD: 1.1246
- USDJPY: 123.38
- GBPUSD: 1.5645
- USDCAD: 1.2290
- Crude: $60.02
- Gold: $1,181
- Dalian Iron Ore (September): 427
– The ASX bathed in the afterglow of news that Warren Buffet says he’ll be buying more Australian shares, including stocks in a bank. That’s after the market received news this morning that he had bought shares in Australian insurer IAG. Yesterday the market backed off at the 200-day moving average which has been an important level traders have watched over the past three months. They’ll be watching again today.
– In Asia yesterday Chinese stocks finished Tuesday’s trade nursing hefty losses. That still leaves the market in nose-bleed territory but being back below 5,000 seems to make more sense than being above it. But that’s an arbitrary level and anyone who has studied markets for more than a few seconds knows that China is going to end badly. At least there will be a decent correction at some point.
– Also in Asia yesterday BoJ Governor Kuroda addressed the diet with a clear message if not for Parliamentarians then for forex traders. He “clarified” his comments about the Yen last week.
He said he was referring to Japan’s real effective exchange rate and had not meant to imply a level for the nominal rate. So USDJPY got a bit messy but overall the sellers are still above the current rate and its back to where it was yesterday. The Aussie dollar is holding a nice little uptrend on the four hour charts — but that implies something has to give in the next 24 hours — while Sterling is testing a one year downtrend at the moment.
– On commodity markets besides the big fall in Iron ore prices on the Dalian exchange yesterday it is largely a story of range trading. Crude has stalled around $59.50 a barrel, while Gold is out of favour even though I like it here. Perhaps copper is the one to watch. It has had a totally aborted rally over the past couple of weeks and is now back at $2.62 a pound. That’s the lowest level since March this year.
– On the data front today Japanese trade data is important in judging the recovery in the economy that has been evident recently. Westpac’s leading index of economic activity for Australia is out and then tonight we get the BoE MPC vote cut and EU CPI. But it all pales in insignificance compared to the FOMC announcement at 4am AEST tomorrow.