Here's your 20-second guide to what Australian traders will be talking about this morning

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Good morning and welcome to your week. Here we go again:

– The Nasdaq made another all-time high on Friday night in New York while gold was hammered back down toward the lowest levels since 2008 – those were the highlights of what was an otherwise unremarkable evening’s trade. The Nasdaq move was largely on the back of a huge 16% rally in Google which took it above $700 for the first time. The Dow was down around 0.2%, the S&P 500 up 0.1% and all of Europe, save for the CAC which was up just 0.06%, was mildly weaker.

– After the worries about Greece and the hiccups in Shanghai, stocks investors and traders have been on tenterhooks. NAB’s co-head of FX strategy Ray Attrill wrote in his morning report that the “VIX (S&P500 Volatility Index) was -0.16 to 11.95 — its lowest close since 5 December 2014.” That makes sense given Greece kicked off again in January this year and Attrill says that’s important for risk assets including the Aussie dollar. “Lower volatility as we come into the peak northern hemisphere summer holiday season augers well for the return of some stability in the AUD in particular,” he said.

– Speaking of Greece, Attrill said:

News that Germany had become the final country to ratify last Monday’s agreement as precursor to commencing talks on the 3rd bail-out package for Greece, came before European markets closed but to no market fanfare. Greece is now expected to receive bridging finance on Monday in time to redeem the bonds held by the ECB as well as the amounts overdue to the IMF. EU official were said to be targeting mid-August for agreement on the EUR86 billion new rescue plan. Greek banks will re-open Monday with still-heavy restrictions on withdrawals and transfers.

– On the data front, there was mild encouragement on Friday for the US dollar which rallied a little and has the euro on the mat down at 1.0834 this morning. The Kiwi is at just 0.6519, the Aussie at 0.7372, the CAD just below 1.30 and the yen is 124.

Westpac’s New Zealand based strategist Imre Speizer said of the data (my emphasis):

US CPI rose 0.3% in June, meeting expectations. The yoy rate is at 0.1%, a slight uptick from the 0.0% rate previously. It’s worth noting that shelter costs, more infamously known as “owners equivalent rent”, which account for almost 25% weight of the total headline weight, are on something of a tear. The monthly gain of 0.36% is the largest one month gain in almost a decade. If this trend is sustained then we need very benign readings in all other categories to prevent core CPI readings of 0.2 to 0.3% per month going forward.

Housing starts and permits were both very punchy in the month, up 9.8% (beating expectations of 6.7%) and 7.4% respectively, although higher density multiples drove the gains in both. Single family starts actually fell a smidgen (-0.9%) while single family permits were up 0.9%. Consumer confidence (Michigan Univ.) was slightly disappointing, the index at 93.3 lower than the 96.0 expected and the 96.1 level in June. However it remains near the 11-year high reading of 98.1.

It’s not hard to see why Janet Yellen and her colleagues are on track to tighten soon. My bet is September.

– Bonds in the US were unchanged on Friday night with the 10s at 2.35%, but rates in Europe rallied a little with the German 10s down 4 points to 0.74% while Italian bonds rallied 8 points and UK 10s were flat at 2.10% In Australia, the 10s look set to open a few points lower this morning at 2.94% while the 3s are up a couple at 2.03%.

Investing.com-ASX200

– On stocks in Australia, it after a flat day Friday and with Japan on a public holiday it could be a quiet week. Futures are suggesting almost no move with the SPI200 closing down just 1 point to 5,612. Stocks in London were down a little on miners and the Royal Mail so the former might weigh on the market here today. But they may not either, given the bullish moves last week where the index defied overnight futures moves and simply rallied all week and then held its gains. As Chris Pash wrote on Friday: “The major banks and big miners were either flat or marginally weaker.” They hold the key again today.

– In Asia on Friday, Shanghai stocks were up another 3.5% in what was a solid performance after the mid-week swoon. That takes the recovery from the lows to 13% now and it seems clear that the authorities are winning at the moment. Attrill reports this morning that “there may be more strength to come from news Friday that the China Securities Finance Corp (CSFC), the main provider of loans to brokerage firms and for margin lending, now has access to $483bn of borrowed funds from a combination of the 5 biggest state owned banks and the central bank.” $483 billion! That’s more than 20 times the size of the rescue package and funding line established two weeks ago. That’s some bazooka. Japan is out today.

– On commodities, no-one wants to own gold it seems at the moment and it looks very close to breaking wide open for a run down to, perhaps below, $1000 on a technical basis. On oil, Commsec’s Craig James said that “prices were mixed again on Friday. Expectations of increased oil exports from Iran were balanced against data showing that the number of oil rigs operating in the US rose last week.” Copper dipped significantly back to $2.50 while Dalian iron ore is at 370.5.

– On the data front, there is not much out today with the Australian calendar empty. Eurozone current account and German PPI are of minor interest. Greek banks are expected to open.

– Here’s the overnight scoreboard (8.01am AEST):

  • Dow Jones down 0.19% to 18,086
  • Nasdaq up 0.91% to 5,210
  • S&P 500 up 0.11% to 2,126
  • London (FTSE 100) down 0.31% to 6,775
  • Frankfurt (DAX) down 0.37% to 11,673
  • Tokyo (Nikkei) up 0.25% to 20,650
  • Shanghai (composite) up 3.5% to 3,957
  • Hong Kong (Hang Seng) up 1.0% 25,415
  • ASX Futures overnight (SPI September) +1 points to 5,612
  • AUDUSD: 0.7372
  • EURUSD: 1.0840
  • USDJPY: 124.07
  • GBPUSD: 1.5605
  • USDCAD: 1.2977
  • Crude: $50.83
  • Gold: $1,133
  • Dalian Iron Ore (September): 370.5

And now from CMC Markets’ Ric Spooner is today’s Stock of the Day

Santos

Oil and gas producer, Santos unveiled a quarterly production report on Friday that reflected some of the key driving forces for the wider Australian economy at the moment:

  • Santos sold 4% more product than it did in the corresponding period last year but its revenue fell 19% due to a sharp drop in the prices it received.
  • Revenue will get a major boost when Santos begins selling LNG from the new coal seam gas operation in Queensland. This is due to begin in the third quarter but the market continues to be nervous about the potential for even lower prices in a well supplied energy market.
  • At $366m, Santos’ capital expenditure was down 65% on the previous year as it reduced business investment in an effort to conserve cash and protect its balance sheet against uncertain times.

Friday’s price action indicated potential weakness or at best sideways drift. The gap left by Wednesday’s strong open has been closes quickly in a sign of exhaustion while the recent uptrend looks more like the classic “abc” corrective pattern than the start of a major move higher.

Ric Spooner, chief market analyst, CMC Markets

You can follow Ric on Twitter @ricspooner_CMC

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