– US stocks closed just shy of all-time highs after more weakish data had stock and bond traders focused on an enduring delay to the Fed’s first rate hike. European stocks were marginally higher while crude oil surged back to retest the breakout level from earlier this week. On Forex markets it was quiet but the weak data sapped the US dollar’s recent rally of strength.
– On the US data front jobless claims were up 10,000 to 274,000 just a smidge over the 271,000 expected. Existing home sales fell 3.3% to a 5.04 million annual rate in April while the leading index of economic growth was up 0.7% in April against expectations of a rise of 0.3%. But the Philly Fed survey eased from +7.5 to +6.7 and the Markit “flash” manufacturing index also eased lower from 54.1 to 53.8 in May. Expectations were for a rise.
– So it’s not hard to see why US 10 year bonds rallied 6 points higher to 2.19%. That helped Australian 10 year bonds jump a few points. They’re expected to open at 2.92% this morning. In Europe rates didn’t move even though Germany’s “flash” manufacturing PMI missed to the low side last night. Bunds actually rose 1 point to 0.64%. In the UK Gilt shrugged of the huge rise in retail sales for April which printed 1.2% against 0.4% expected.
Here’s the overnight scoreboard (8am AEST):
- Dow Jones flat at 18,285
- Nasdaq up 0.38% to 5,090
- S&P 500 up 0.23% to 2,130
- London (FTSE 100) up 0.09% to 7,013
- Frankfurt (DAX) up 0.14% to 11,864
- Paris (CAC) up 0.26% to 5,146
- Tokyo (Nikkei) flattish at 20,202
- Shanghai (composite) up 1.89% to 4,530
- Hong Kong (Hang Seng) down 0.22%
- ASX Futures Overnight (SPI June) +19
- US 10 Year Bond -0.04% to 2.25%
- Australian 10 year bond 2.93%
- AUDUSD: 0.7892
- EURUSD: 1.1107
- USDJPY: 121.00
- GBPUSD: 1.56588
- USDCAD: 1.2197
- Crude: $60.76
- Gold: $1,206
- Dalian Iron Ore (September): 422
– On the local market yesterday the recovery in the ASX continued. Feedback from some brokers was that a lot of traders had been watching the support zone we’ve been talking about over the last week or so. With the close of 5662 yesterday the market is 100 points off support and 100 points below the current resistance level. With futures up 19 points it should be a better day.
– In Asia yesterday another Chinese billionaire saw a large part of his fortune evaporate. I know it’s Hong Kong, not Shanghai, but what’s remarkable about this and the Hanergy wipeout the day before is that the overall market is unaffected. That’s a really good sign for the strength of, what has felt like, a rampant speculative rally. Speaking of which, even with this week’s solid rally, the Shanghai composite is only up 1.99% for the month. With additional hopes of stimulus coming after the weak “flash” manufacturing PMI yesterday it’s going to be hard for the bears to get any traction.
– On forex markets it was a calmer day than we’ve been used to lately with the US dollar hurt a little by the weaker data. The problem with that is that most of the alternatives are weak in varying degrees themselves. It makes for a market more likely to be range bound than break out — in a broad sense at least. However, one nation which is looking okay is Britain and the solid retail sales helped Sterling rise about a cent last night. The Aussie is just below 79 cents.
– Turning to commodities, if you read the commentaries on trade regarding the Dalian iron ore exchange over the past couple of days you can see there has been an almost complete financialisation of what is supposed to be a physically traded market. That means that fundamentals are important but equally now traders are driving the price as much as anything. That means the wild ride is likely to continue.
– Speaking of which iron ore is back at 422.5, gold is down a little and copper is at $2.87.
– On the data front Mario Draghi speaks today and we get a BoJ press conference after the monetary policy statement. Tonight German GDP is going to be very interesting and important while Ifo is also out. US CPI tonight is huge given Fed discussions and then we get Mark Carney and another Mario Draghi speech tonight.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
With US bond yields falling last night, today might be another positive session for local bank stocks.
If this happens, the smaller banks might be worth a look for short term traders given that the market’s initial focus appears to have been on the major banks.
Suncorp stopped at the 61.8% Fibonacci level on Wednesday. If it can rally past Wednesday’s high at $13.20, this represent a rejection of this retracement level and set up for a potential move higher.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC