– A little reversal in fortunes overnight with stocks in the US and Europe lower. The US dollar and interest rates were also down. Westpac New Zealand said there was “no single factor evident to explain the moves in all three asset classes.” There wasn’t and while IBM’s earnings miss is quoted as one of the key drivers of equity weakness it’s not responsible for all the selling which left the Dow down 1%, S&P 500 off 0.4% and stocks in Germany down more than 1%.
– On forex markets the US dollar weakness saw the Euro rally close 1 cent back above 1.09. This helped the Aussie and the Kiwi continue their recovery off recent lows but Sterling is becalmed, waiting on the BoE later this week. Forex and interest rate traders in Australia will be busy around midday today with the release of the second-quarter CPI at 11.30am AEST while RBA Governor Glenn Stevens is giving his annual Anika Foundation speech at 1.05pm AEST.
– While year on year inflation in Australia is expected to print a benign 1.7%, according to market pundits, the quarterly increase is expected to print a stonking 0.8% for the quarter as petrol prices bounce back. I don’t know about you but I was paying under $1 a litre on Pennant Hills road earlier this year and have regularly been paying $1.40 plus for the past few months. David Scutt had an excellent wrap of what the banks are saying about CPI.
– Looking at the Anika speech by Governor Stevens, it is worth noting the prominence of this event in his schedule over the years. Last year was the very important “animal spirits” speech. He may or may not move markets today but we are likely to get a deeper look into his and the RBA’s thinking.
– On local markets yesterday it was another good day’s trade with the index up 0.35% on top of Monday’s 0.35%. Probably one of the most interesting things to happen yesterday was the release of research from investment bank Credit Suisse, which downgraded its outlook for the ASX 200. The bank dropped its year end target by a massive 500 points, from 6500 to 6000, saying their previous target is probably out of reach. But it’s clear they remain constructive on the market overall. Chris Pash has the details. Turning to the outlook for the day and overnight futures traders have taken the September SPI 200 contract down 27 points to 5616, suggesting some weakness.
– In Shanghai stocks rose 0.66%. Authorities in Beijing will be doing cartwheels at the result given the Shanghai composite is back above 4,000 and has done so this week in the absence of the acute volatility we have experienced over the past month. They will be looking for continued small rallies but in particular a lack of volatility to rebuild investor confidence in the market.
– On commodity markets gold is down at $1100 and looking sick. Nymex crude climbed off the mat to regain $50 a barrel while Dalian iron ore dipped a bit to 386.5 overnight.
– On the data front we have Australian CPI and the Anika speech. Asia is largely data-free today but tonight traders, and Sterling, have a huge event with the Bank of England monetary policy decision. In the US existing home sales are out and at 7am tomorrow morning the RBNZ announces its decision on monetary policy.
– Here’s the overnight scoreboard (8.03am AEST):
- Dow Jones down 1% to 17,919
- Nasdaq down 0.21% to 5,208
- S&P 500 down 0.43% to 2,119
- London (FTSE 100) down 0.29% to 6,769
- Frankfurt (DAX) down 1.12% 11,604
- Tokyo (Nikkei) up 0.9% to 20,841
- Shanghai (composite) up 0.66% to 4,018
- Hong Kong (Hang Seng) up 0.52% 25,536
- ASX Futures overnight (SPI September) -27 to 5,616
- AUDUSD: 0.7424
- EURUSD: 1.0945
- USDJPY: 123.83
- GBPUSD: 1.5551
- USDCAD: 1.2946
- Crude: $50.36
- Gold: $1,101
- Dalian Iron Ore (September): 386