A quick recap:
Unless you are trading the energy complex (Nymex crude down 2.4%, natural gas off 2.9%, Canadian dollar down 1.2%), it was relatively quiet night. But it was also a night where you get a real sense that the momentum in the stock market rally has really disappeared and the falls in iron ore, the Aussie and Kiwi dollars suggest investors have again become extremely cautious.
After making a high of 17,314 last night, the Dow actually managed to finish in the red at 17,168 for a loss of 0.28%. The S&P 500 closed down a little under 0.6%. It too had been a little higher early, but was dragged lower as traders take stock that the technical resistance just seems too strong.
The Nasdaq lost 0.84% as some of its constituents in the biotech industry came under pressure. Valeant Pharmaceuticals was hammered more than 30% lower at one point after a short seller released a report saying that the company cooked its books and committed fraud. The company denied it but the damage was done and the short seller no doubt profited handsomely.
Europe missed most of the selling action and closed in the black. But futures traders on the ASX this morning have the market pointing to a fall of around 0.5% with the December SPI off 26 points. That weakness could be exacerbated given the weakness in oil and iron ore. Likewise, yesterday’s ramp into the close on the physical ASX market saw it retest its breakdown level and reverse. That will reinforce the break for technical traders.
On currency markets, the Aussie started to fall late yesterday afternoon after the Chinese market started to reverse aggressively (that could also hurt the ASX today) but the price has stabilised just above 72 cents. Euro is quiet awaiting the ECB tonight. There is a small chance that Mario Draghi can signal more QE but for the moment the lack of action suggests traders aren’t convinced either way. Sterling was fairly quiet, as was the yen. But the Canadian dollar was hammered after the Bank of Canada decided to leave rates on hold but downgrade growth in its statement. Add in some weakness in crude and the CAD is off 1.2% with USDCAD back above 1.31.
On the data front today, the RBA’s Malcolm Edey is talking at 9.30am in Sydney and then at 11.30am we get the results of the quarterly NAB Business survey. That’s the bigger one with more respondents. It was taken in August and the NAB’s co-head of global currency strategy Ray Attrill said in a note this morning that “while the actual reading on business confidence will get some initial wire coverage (it’s a larger sample of the August monthly survey), there should be more interest in what the survey says about 12-months-ahead capital expenditure plans and employment expectations.”
Offshore, Japan has some data on foreign bond investment, business climate is out in France tonight and then UK retail sales are to be released. The ECB decision and the press conference are the key events tonight however. In the US we get Chicago Fed activity index, jobless claims, home prices, existing homes sales and the Kansas Fed index.
The overnight scoreboard (7.53am AEDT):
- Dow Jones Industrials -0.28% to 17,168
- Nasdaq Composite -0.84% to 4,840
- S&P 500 -0.58% to 2,018
- London (FTSE 100) +0.05% to 6,348
- Frankfurt (DAX) +0.89% to 10,238
- Tokyo (Nikkei) +1.91% to 18,554
- Shanghai (composite) -3.47% to 3,306
- Hong Kong (Hang Seng) -0.37% to 22,989
- ASX Futures overnight (SPI December) -26 to 5,212
- AUDUSD: 0.7206
- EURUSD: 1.1338
- USDJPY: 119.92
- GBPUSD: 1.5419
- USDCAD: 1.3137
- Nymex Crude (front contract): $45.22
- Copper (US front contract): $2.3595
- Gold: $1,166
- Dalian Iron Ore (January): 365 (denominated in CNY)
- US 10 year bond rate: 2.03%
- Australian 10 year bond rate: 2.60%
– While a story on house prices may not usually find its way into my daily note for traders, Paul Colgan’s article on Sydney house prices is one worth looking at. The reason is that while sentiment in Sydney is down because house prices have risen so high, you can see in the analysis of the guys at Credit Suisse, who he references in the piece, that Sydney property prices can actually stay fairly strong. That doesn’t mean they can’t dip, but the supply demand imbalance and the attractiveness of Sydney property to outsiders can keep relatively firm even though they are likely to stop rising. That’s important for consumer sentiment and consumption. No crash is a good thing for the Australian economy and reduces the chance of another RBA rate cut. You can read Paul’s piece here.
– Another thing that I wouldn’t normally talk about here is the comments from John Fraser, Australia’s treasury secretary. But again, his thoughts – shared with the Senate yesterday – are germane to the discussion around interest rates. Fraser says he gets a sense that business conditions have been picking up and that the strength is across the board, even amongst our tradies. That, along with the RBA minutes released earlier this week, seems to rule out any chance that the RBA will cut on Melbourne Cup Day or even that the RBA will downgrade growth at the November Statement on Monetary Policy.
– That would normally help the Aussie dollar but there is a clear fall in risk appetite over the past few days. Emerging market currencies have been selling off again, crude has fallen heavily, copper has reversed and stocks have stalled. So while the Aussie has support at 72 cents, it looks biased lower.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Super Retail Group (SUL.ASX)
Diverse retailer SUL pleased the market with a solid trading update at its AGM yesterday. Its brands include Supercheap Auto, Rebel Sports and Rays. In a patchy retail environment, it achieved like for like sales growth of 5% in auto; 6% in leisure and 7% in sports retailing.
This was rewarded by a 4% rally in the stock price but has seen it run into potential chart resistance in the form of the 200 day moving average as well as previous highs and lows. If it struggles to get clear of this level in coming days, potential buyers might yet get a correction to buy into.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC