Good mornings, and happy Friday to you. Here’s the score so far.
– The Nasdaq hit a new all-time high last night with a stellar 1.26% gain on the back of solid gains across the board. That helped the Dow higher with Microsoft, IBM and Apple the best performers on the index. The S&P was up as well with Netflix posting a staggering 18% gain after the company posted quarterly results above expectations Wednesday.
– European stocks were also higher after “Eurozone officials moved quickly to shore up Greece following its acceptance of new austerity measures,” Westpac’s New Zealand based strategist Imre Speizer wrote in a note to clients this morning. Key to the moves was news that The European Central Bank raised its emergency liquidity assistance to Greek banks by €900 million ($US977.58 million.) ECB president Mario Draghi announced the offer at a news conference. Reuters reported that Greek banks will reopen on Monday. One thing worth noting is that Draghi said it was “uncontroversial” that Greece needed debt relief. I think they will get it and in a way that is consistent with Angela Merkel’s recent comments. She said no “nominal” haircut. But there is more than one way to skin that cat and if you can’t get nominal relief, then a long period without interest and a little bit of inflation can do the job for you.
– Anyway, on the data front we saw more evidence that the time is near for the rate hike with jobless claims printing 281,000 last week. Akin Oyedele from BI US reports that in a note to clients after the release, Pantheon Macroeconomics’ Ian Shepherdson wrote, “after 18 straight weeks below 300K, it’s clear that the trend in layoffs is very low indeed, close to all-time lows when adjusted for the rising population over time”. Boom, here comes the rate hike – and not just one. Akin also reports that “homebuilder sentiment rose to the highest since November 2005, with the National Association of Homebuilders’ index climbing to 60 from 59 in June. The NAHB said the housing recovery should continue into the second half of the year, but there are challenges with staff and lots shortages.” Challenges with staff – interesting. On the other side of the ledger, the Philly Fed manufacturing index crashed to 5.7 against expectations of 12. Manufacturing everywhere is struggling a little. Thank goodness developed markets are service-based economies.
– To other markets now and the apparent interest in buying Aussie dollars off the 0.7350 level we saw in late Australian trade yesterday, while the Euro and others were falling, continued overnight and the Aussie finds itself back above 74 cents this morning. Given our trans-Tasman cousin has been hammered this week, with the Kiwi just above 65 cents this morning, Aussie Kiwi is back near recent highs at 1.1373. Euro took out support in the low 1.09 region and is lower this morning. The yen is back above 124, the CAD is closing in on 1.30 but sterling is doing well because the Bank of England governor continues to hint rates will be raised soon. Last night he said he’ll be looking at things next year.
– Looking at the ASX and it’s clear that the buyers are back. I didn’t expect another top day yesterday but the 200 index rose another 0.59% to 5,669. The index couldn’t quite climb to the recent June highs but as Chris Pash wrote yesterday even with the weak lead from the US “the Australian market opened higher and kept going. Six out ten sectors were higher. The banks were all up, led by Westpac up 1.85% to $34.63. The big miners were slightly higher, but energy stocks suffered. Santos was down 1.41% to $7.72 and LNG 1.86% to $3.70.” Futures are pointing to another positive day today but only mildly so. 5700/10 is big technical resistance.
– In Asia yesterday, Shanghai had a rollercoaster ride moving from sharply down, with a low of 3,690, before rallying to a pre-lunch high of 3,877 before closing at 3,823. The battle is raging for the heart and souls of Chinese stocks and after two days of selling the authorities will be pleased that the market had a positive day. I have little doubt they will hold the market in as long as they fell they have to. As David Scutt highlighted yesterday, it seems the the government might be using futures to help its cause. That’s smart. The Nikkei rose to the highest level in 3 weeks yesterday with a 0.7% rally and the rest of Asia finished in the black as well.
– On interest rate markets, it was a bit of a wild ride in the German 10-year bund (in a capital sense) with the yield opening at 0.754% before moving up to 0.83% and closing lower at 0.78%. Italian and Spanish bonds were lower, UK 10s dipped 4 points to 2.10% and US bonds closed unchanged at 2.35%. The impact of all this is that Aussie 10s are expected to open at 2.98% with the 3s at 2.03%.
– On commodity markets, gold hit its lowest level in eight months at $1,144, Nymex crude dipped again toward the recent lows in the mid-$50 region after moving in a big $2 range. Copper is a little higher at $2.53 and Dalian iron ore futures were up 3 to 368.
– On the data front today, it is quiet in Australia but we are still waiting on Chinese new loan data. Tonight we get US CPI, which is impoertant given Janet Yellen’s comments last night before the Senate that she wouldn’t want to see inflation stay low. The market is expecting a rise of 0.2% monthly and 1.8% year on year for the ex-food and energy read. Canadian CPI is also important tonight given recent CAD moves.
– Here’s the overnight scoreboard (8.01am AEST):
- Dow Jones up 0.39% to 18,120
- Nasdaq up 1.26% to 5,163
- S&P 500 up 0.8% to 2,124
- London (FTSE 100) up 0.63% to 6,796
- Frankfurt (DAX) up 1.53% to 11,716
- Tokyo (Nikkei) up 0.7% to 20,600
- Shanghai (composite) up 0.49% to 3,824
- Hong Kong (Hang Seng) up 0.43% to 25,162
- ASX Futures overnight (SPI September) +7 points to 5,629
- US 10 Year Bonds flat 2.35%
- German 10 Year Bonds +1 to 0.78%
- Australian 10 Year Bonds +4 to 2.98%
- AUDUSD: 0.7403
- EURUSD: 1.0876
- USDJPY: 124.01
- GBPUSD: 1.5606
- USDCAD: 1.2955
- Crude: $50.91
- Gold: $1,144
- Dalian Iron Ore (September): 368
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