– A good night for stocks, a huge night for the US dollar and Euro after rumours of a deal on Greece surfaced and were then scotched. A good night for gold too, which is back above $1,200.
– Let’s talk forex markets first. At one point last night we had Euro above 1.14, Sterling above 1.59, the Aussie dollar closing in on 0.7850 and the Yen pushing USDJPY down 122 flat. That was because the Fed-induced selling of the US dollar already had a bid tone in those currencies, which was built on rumours of a Greek deal hit the screens. It hasn’t happened yet and currencies are off their highs — the US dollar is a bit stronger again. The situation remains fluid.
– On Greece the FT reported this morning that the EU has called a crisis summit after failure of Greece bailout talks. EC president Donald Tusk has called EU presidents and prime ministers to Brussels on Monday. A deal still seems far away but I’m going to back Angela Merkel. I’m going to back her to force a deal through between the EU Group and Greece and I’m going to back her to prevail over and above the natural reticence of the EU finance ministers to give Greece a sweetheart deal. The reason I’m doing that, amidst all the turmoil and the real chance that no deal gets done, is that the EU is and always has been a political idea. Greece leaving threatens the wider vision of what the EU has become and right now the last thing it needs is more turmoil over its borders. That means I must be bullish Euro. Heaven forbid.
– Turning to stocks, and traders this morning will be greeted by a sea of green. Meaning September SPI 200 futures are up a solid 41 points (the June contract has now expired). That’s thanks to a new all time high on the Nasdaq and solid gains in the US and on European markets.
– Part of the strength in stocks was of course hopes for Greece but mostly the fact that US data prints don’t put any pressure on the Fed to hike rates in a hurry. US CPI rose 0.4% in May to be up just 0.1% in the past 12 months. On a core basis CPI was flat with a rise of 1.7% year on year. Jobless claims dipped quite sharply to 267,000 which is just another sign that the Fed is on track because the jobs market is improving. And on that note, take a look at Mike Birds article noting the missing puzzle piece of the global economic recovery is finally falling into place.
Here’s the overnight scoreboard (7.08am AEST):
- Dow Jones up 1% to 18,115
- Nasdaq up 1.34% to 5,132
- S&P 500 0.99% to 2,121
- London (FTSE 100) up 0.41% to 6,707
- Frankfurt (DAX) up 1.11% to 11100
- Paris (CAC) up 0.27% to 4,803
- Tokyo (Nikkei) down 1.13% to 19,990
- Shanghai (composite) down 3.66% to 4,786
- Hong Kong (Hang Seng) down 0.22% to 26,694
- ASX Futures Overnight (SPI September) +41 point to 5,505
- US 10 Year Bonds +3 points to 2.34%
- German 10 Year Bonds unchanged at 0.81%
- Australian 10 year bonds -2 point to 2.95%
- AUDUSD: 0.7799
- EURUSD: 1.1367
- USDJPY: 122.95
- GBPUSD: 1.5880
- USDCAD: 1.2224
- Crude: $60.51
- Gold: $1,202
- Dalian Iron Ore (September): 432
– It’s going to be a better day on the local market today. Or at least it should be given the solid rise in futures last night and the great lead offshore. The question, in a trading perspective, is whether traders, like me, are a little sick of the volatility we’ve seen lately or whether investors, like most people, simply see the moves offshore as a good reason to wander back into the market. I’ll go with the latter and guess the market can get up and through the 200-day moving average today and end the week there.
– In Asia yesterday the Nikkei dropped to a one-month low after the Yen strengthened, and looks biased lower, on the back of the Fed signals in the FOMC statement. In Shanghai it was an even worse day wth the market down almost 4%. But the market still hasn’t broken the last 3 month’s uptrend. Watch the 4700/20 level today.
– On commodity markets gold finally moved and is up above $1200 for the first time in a month. It’s testing it’s 200-day moving average. Copper steadied in the low $2.60 a pound region and il rose around 1% as the weaker US dollar lifted the weight off prices. Dalian iron ore rose 1.17%.
– On the data front today we get the BoJ’s monthly statement along with the leading index of growth for Japan. PPI is out in Germany and then we get Canadian CPI.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
The Warren Buffet deal has so far had a pretty short lived impact on IAG’s share price.
The upside for those wishing to join Mr. Buffet as a shareholder in IAG is that the next few weeks might produce a second bite at the cherry courtesy of a correction to buy into.
For chart followers, there are a couple of support levels that look as though they might have potential at this stage. The first would be the zone around the top of the gap formed by the Buffet announcement and the 61.8% Fibonacci retracement between $5.54 and $5.60. A second might be the 78.6% Fibonacci retracement around $5.44.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC