– While New Yorkers hit the beach for Memorial Day markets in the US and UK were shut overnight. That removed a lot of traders and trading impetus from global markets which were understandably quiet. With Greek concerns continuing, and after Mario Draghi’s comments over the weekend, the US dollar hit its highest level in more than a month in Dollar Index terms. Euro fell to 1.0960 at one point but the Aussie dollar did well to hold above 78 cents with an overnight low of 0.7805.
– Grexit is now looming as a clear and present danger to the Euro and maybe even global markets. Sure, it makes up hardly any of the EU’s total economic output and is even less important to overall global growth and markets but the unknown consequences of a grexit on markets, both related and unerelated, could be destabilising. Overnight we heard from Greek Financial Minster Yanis Varoufakis who wrote an article entitled “Austerity Is the Only Deal-Breaker”. He wrote that Greek is keen to work with its creditors on positive reforms but said:
The problem is simple: Greece’s creditors insist on even greater austerity for this year and beyond – an approach that would impede recovery, obstruct growth, worsen the debt-deflationary cycle, and, in the end, erode Greeks’ willingness and ability to see through the reform agenda that the country so desperately needs. Our government cannot – and will not – accept a cure that has proven itself over five long years to be worse than the disease.
So as BI UK’s Mike Bird wrote last night the new Greek government’s honeymoon is over — and default is just around the corner.
Here’s the overnight scoreboard (7.25am AEST):
- Dow Jones Closed
- Nasdaq Closed
- S&P 500 Closed
- London (FTSE 100) Closed
- Frankfurt (DAX) Closed
- Paris (CAC) down 0.5% to 5,117
- Tokyo (Nikkei) up 0.74% to 20,413
- Shanghai (composite) +3.35% to 4,813 – AMAZING
- Hong Kong (Hang Seng) Closed
- ASX Futures Overnight (SPI June) -4 to 5,722
- US 10 Year Bond Closed
- Australian 10 year bond 2.91%
- AUDUSD: 0.7819
- EURUSD: 1.0976
- USDJPY: 121.52
- GBPUSD: 1.5469
- USDCAD: 1.2310
- Crude: $59.80
- Gold: $1,206
- Dalian Iron Ore (September): 435.5 (up 14)
– Locally yesterday the market did really well given the lead from offshore Friday. Only three of the top 50 stocks fell and the Independence bid for Sirius to create another big Australian miner was also positive. FMG did better, up almost 3% as Chinese interests circle. But the big news was another test, and fail, of the bottom of the old trading range. If the ASX 200 can push up and through this 5.745 region it could be a very bullish sign for the market.
– In Asia yesterday Shanghai did as Shanghai does and rallied hard again. Are we getting close to a top? I think so, but as our own David Scutt points out, after yesterday’s massive announcement on the 1000 projects China has planned, even though China’s stock market surge screams danger, fighting policymakers can be equally dangerous. Traders would be mad to go short until a top is clearly in place but parabolic markets throughout history eventually end.
– Elsewhere crude was quiet, gold becalmed around $1,206 and copper was steady at $2.83 a pound. But the Dalian iron ore price ripped all the way back to 435.5 overnight. The new stimulus measures and PPP clearly have had an impact.
– On the data front today, Kiwi trade is out along with Singaporean Q1 GDP but the big one tonight is durable goods in the US. There’s also the Case Shiller home price index, Markit services PMI, new home sales and Richmond Fed survey tonight.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Superficially, today looks like being a quiet day for the stock market with US markets closed and not a lot on today’s market calendar. However, it might just be more interesting than expected.
There was some good upward momentum yesterday, both in regional markets like China and Japan and in local stocks. Many charts displayed signs that bargain hunters have decided that the time has come to act. A bit of buying this morning could translate into more upward momentum today with buyers acting on fear of missing out.
The NAB chart provides a clue to this possibility. Yesterday’s candle completed a bullish engulfing pattern where the body of the candle “engulfed” the previous day. While Friday’s candle was red indicating a close below the open, yesterdays was green with a stronger close. All this paints a picture of reversal with the buyers in charge at the end of the day.
The decline in NAB looks like an Elliot 5 wave move. So those looking for confirmation that any rally from here is anything more than a bit of a minor bounce might be waiting on a move past the resistance formed by the low at “4”and the 200 day moving average between about $34.10 and $34.60.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC