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

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– Stocks were down last night, in what was another mild risk off night. Just a few days after new all-time highs in the Nasdaq and the recent strength in almost every market around the world, I’d probably characterise this as the Ying and Yang of market flow. Or, wax-on, wax-off Mr Miyagi — on a macro level. Digging deeper, the big falls in oil since the Iran deal was floated and continued commodity weakness — which is hitting the miners — reveals that sectorally there is still a lot going on bellow the surface. It’s a great market for traders.

– But first to the big mover this morning. The RBNZ cut rates 25 basis points to 3% but the Kiwi rocketed. In a trading sense everything was baked in the cake for the Kiwi. But the 1% this morning, which has taken the Kiwi to 0.6635, is a massive move even if you thought a rally was a chance. Here’s Imre Spiezer from Westpac New Zealand’s explanation:

The crucial guidance paragraph read: “A reduction in the OCR is warranted by the softening in the economic outlook and low inflation. At this point, some further easing seems likely.” This is slightly more dovish language than June’s : “We expect further easing may be appropriate. This will depend on the emerging data.”, but not as strong as the market was hoping for.

– Also moving materially was the price of crude overnight, which has crashed down to the low. The fall of more than 3% has taken the Nymex front contract to a close of $49.19. Technical traders will be looking at the chart of crude and thinking, oops — that’s going back to $44.

– Elsewhere in commodities the World Bank expects iron ore prices to halve, while gold remains under pressure, although it is holding above the really important $1,085 technical level for the moment. Copper is down again at $2.43 a pound.

– Back to stocks and the worst performer was the FTSE in the UK, which was under pressure from all fronts including the miners overnight. It was down 1.5%. Stocks in Frankfurt fell 0.7% which was the same fall for the Nasdaq in the US. The Dow and S&P were off 0.4% and 0.3% respectively.

– It was also a terrible day yesterday for the ASX 200, falling 1.6% and leaving the 200 index at 5,614. Chris Pash noted the action yesterday afternoon saying, “The big banks lost ground, led by the Commonwealth, down 1.67% to $86.63, and Westpac 1.58% to $34.35. The AMP lost more than 2% to $6.30. BHP was weaker by 2.05% to $26.27 and Rio Tinto 2.25% to $52.18. Energy stocks lost more than 2% as a group. Santos was down 2.95% to $7.25.” However, for me, the most interesting event was recently spun off ex-BHP operations of newly listed miner South32 took a $US1.9 billion writedown on its operations.

– Futures are only marginally lower today because the worst of the expectations about where US markets would head overnight seemed to have been built into the prices yesterday. September SPI 200 futures are down 2 points to 5549.

– In Asia yesterday markets were largely lower with the Nikkei off down for the first time in a week. At the close the index was 1% lower at 20,593. Shanghai held firm though, with the Composite index up 0.22% to 4,026 — stability. Beijing will be pleased. Hong Kong stocks were lower by around 1%.

– On forex markets the BoE decision didn’t help Sterling which is still at 1.56ish. Euro is holding ground above 1.09 and the Aussie has not been able to follow the Kiwi higher and is still below 74 cents this morning. That means Aussie Kiwi has dropped back to 1.1111.

– Bonds rallied on the back of the equity and commodity weakness. The Fed might be about to raise rates but these two factors are bullish for long bonds at the moment. US 10’s are at 2.32%, German Bunds at 0.70% and UK Gilts at 2.05%. Aussie rates are lower as well with the 10’s back under 2.90% to 2.895%.

– On the data front overnight there was another sign that the Fed will be moving soon. Akin Oyedele from BI US reports:

The US housing market is on fire. Existing home sales rose 3.2% to an annualized pace of 5.49 million, the fastest pace since February 2007.In the release from the National Association of Realtors, Lawrence Yun noted that the past two months were the strongest for sales since early 2007. “There are several positive tailwinds for the housing sector that should result in a more pronounced pickup in activity over the next several quarters,” wrote Deutsche Joe LaVorgna in a note to clients.

– Also, the latest report from the Federal Housing Finance Agency (FHFA) showed prices rose 0.4% month-over-month, matching estimates.

– Here’s the overnight scoreboard (8.03am AEST):

  • Dow Jones down 0.38% to 17,851
  • Nasdaq down 0.7% to 5,171
  • S&P 500 down 0.24% to 2,114
  • London (FTSE 100) down 1.5% to 6667
  • Frankfurt (DAX) down 0.72% to 11,520
  • Tokyo (Nikkei) down 1% to 20,593
  • Shanghai (composite) up 0.22% to 4,026
  • Hong Kong (Hang Seng) down 0.99% to 25,282
  • ASX Futures overnight (SPI September) -2 to 5,549
  • AUDUSD: 0.7378
  • EURUSD: 1.0924
  • USDJPY: 123.93
  • GBPUSD: 1.5612
  • USDCAD: 1.3029
  • Crude: $49.19
  • Gold: $1,092
  • Dalian Iron Ore (September): 376

And now from CMC Markets’ Michael McCarthy is today’s Stock of the Day

Deconstructing Boral

One little explored side effect of Australians’ love affair with housing is overvaluation of building materials stocks. Boral’s (BLD) defiance of gravity following yesterday’s trading report matches the pricing of Toorak mansions. Sure, they’re top quality, but at that price?

There are good reasons for BLD’s outstanding nine month performance. Exposure to the US housing recovery is a double benefit- improved earnings in now more valuable USD. BLD’s domestic businesses are also swinging higher, and consistent improvements in house prices and building approvals over H1 2015 are likely drivers of the 25% lift in company guidance.

The problem is that even factoring these higher earnings, BLD still looks expensive. At $6.46 a share, the $250 million at the top end of guidance still equates to twenty time earnings. After delivering growth better than 30%, expectations are that BLD will continue to improve at a long term rate of around 16%.

In other words, BLD is currently priced for perfection. An AUD just a few US cents from the RBA target level adds further risk. Investors following an active strategy could be reaching for the sell button. The chart back this up, as yesterday’s spike took BLD to within a whisker of its post GFC high. Double top anyone?

Michael McCarthy, chief market strategist, CMC Markets

You can follow Michael on Twitter @MMcCarthy_CMC

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