– Greece isn’t a done deal yet. Last night Greek prime minister Tsipras let the world know that negotiations had taken a wrong turn after creditors rejected the deal he had proposed.
What probably surprised him most was the creditors, who witnessed the country’s GDP collapse of around 25%, rejected his measures because they are bad for growth. Tsipras has taken aim at the IMF, saying the rejection of such measures hasn’t occurred with other EU rescues. You have to feel for him and the Greek people but maybe the IMF is finally going to push for a haircut on Greek debt. Everybody knows, even my 12 year old was saying it the other day in the car, that Greece needs a debt reduction. But the EU has pushed back saying some of the countries who have lent Greece money are themselves in a tough financial position. The funny thing is we are now closer to them not getting their money via a default.
– Markets didn’t react anywhere near as badly as you might think given the near 5% rally in Europe on Monday and Tuesday. Rather the FTSE managed to get up and the worst performing market that we watch was the IBEX in Spain, which fell just 0.71%. One thing is certain — it’s going to be a long night for Europe’s leaders.
– It was a different story in the US however, with the Dow down just under a percent and the S&P and Nasdaq off around three-quarters of a percent. Data last night hit the bullseye with the latest revision of GDP printing exactly the -0.2% that pundits had anticipated. That’s small enough to be revised away in time and it’s likely that the economy didn’t really shrink at all, according to Barclays. Akin Oyedele from Business Insider US reports the bank are looking through the weakness because of weather and port strikes. The Fed is too, which is why they are warning of rate hikes in the next quarter. The fact that US consumption expenditures rose 0.8% as expected in Q1 reinforces this.
Here’s the overnight scoreboard (7.17am AEST):
- Dow Jones down 0.98% to 17,966
- Nasdaq down 0.73% to 5,122
- S&P 500 down 0.74% to 2,108
- London (FTSE 100) up 0.15% to 6,844
- Frankfurt (DAX) down 0.62% to 11,471
- Paris (CAC) down 0.24% to 5,045
- Tokyo (Nikkei) up 0.28% to 20,868 a new 19 year high
- Shanghai (composite) up 2.48% to 4,690
- Hong Kong (Hang Seng) up 0.26% to 27,404
- ASX Futures overnight (SPI September) -12 points to 5,616
- US 10 Year Bonds -4 points to 2.37%
- German 10 Year Bonds down 3 points to 0.85%
- Australian 10 year bonds down 2 to 3.05%%
- AUDUSD: 0.7703
- EURUSD: 1.1202
- USDJPY: 123.87
- GBPUSD: 1.5701
- USDCAD: 1.2382
- Crude: $60.21
- Gold: $1,175
- Dalian Iron Ore (September): 440
– Yesterday the Australian stock market didn’t do terribly much at an index level. The ASX200 and All Ords both close largely unchanged. But that stability masked some seriously large intra-index moves. Liquified Natural Gas Limited followed Tuesday’s 4.84% rise with another jump of 8.97% yesterday. On the negative side of the ledger Flight Centre was hammered again, posting the weakest move on the ASX on the day, down 8.8%. That’s after yesterday’s 13.59% drop. Flexigroup came under pressure for the second day in a row too, down another 5%.
– In Asia yesterday it was a banner day for the Nikkei which etched out a small gain, lifting it to the highest level since 1996. The market is up around 20% this year — signalling the economy is improving. Nothing like debasing your currency to get growth going. Australia knows that — it’s what we usually do. Elsewhere, Shanghai rallied to finish the day at 4,690. It was another volatile day with the low, just after lunch, of 4,553.
– On bond markets the Greek news took the edge off the bond bears strength and rates rallied a little. Where to next really depends on what happens with Greece over the next few days.
– Forex traders were fairly sanguine about the fresh news on Greece by days end but that masked some volatile ranges including around 100 points in the Aussie dollar. The buyers came for the Kiwi which has knocked AUDNZD a little lower but the big currencies, the Euro and Yen, are essentially where they were this time yesterday.
– Crude fell again as it continues to be trapped in a very tight few dollar box. Last night’s data release showed crude stockpiles fell but refined product rose. Gold dipped again and copper is steady at the low $2.60 a pound region. Dalian iron ore rose a little to 440 yesterday.
– On the data front today it’s going to be quiet in Asia and the first decent piece of data we’ll get is the Gfk consumer sentiment in Germany tonight. In the US we’ll get jobless claims and another consumption release.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Harold M Gartley is a name you may not be familiar with. He was a , US chart analyst of the mid-20th century best known for discovering the pattern shown on the ASX chart below.
This is a 3 part correction where XA=BC. In the classic, textbook version, the Gartley correction stops neatly at a 61.8% Fibonacci retracement just as this one looks as though it might.
If the share price continues to prevaricate a little around current levels, it could also pull back to from the right shoulder of a minor bullish head and shoulder pattern. If that happens I will have it on my watch list looking for a break through the head and shoulder neck line to confirm the Gartley pattern indicating potential for a decent rally in this stock.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC