– Healthcare stocks in the US performed well last night after the Supreme Court upheld important aspects of Obamacare. But the overall market is down as the Greek drama drags on. German finance minister Wolfgang Schaeuble said the Greeks have gone backwards and it’s up to them to get a deal over the line. This means there’ll be another meeting tonight and work to be done over the weekend. There’s expectations of an announcement to be made before the open of trade in Asia on Monday. That’s interesting because there’s little reason for European leaders to target Monday morning in our time zone unless they think the announcement will impact the Euro, which begins trading for the week at 5:00am (AEST). Grexit? Default? Haircut? Either way, it’s an intriguing target.
– It wasn’t all about Greece though, with further signs the US economy is doing much better. The Atlanta Fed’s GDPNOW indicator of growth is estimating a 2.1% rate for the 2nd quarter. Supporting that estimation was news last night that consumers are back. BI US reporter Akin Oyedele wrote:
“The US consumer is back. Personal spending rose 0.9% in May, more than expected, and the most since August 2009. Personal income rose 0.5%, in line with forecasts and equal to last month’s revised reading of a 0.5% increase in income. “No one should be worried about the economy based on this data-set,” wrote Chris Rupkey at Bank of Tokyo-Mitsubishi in a note. “No one. Spending on everything durable goods, non-durable goods, services, all three categories adding a lot to the real dollars spent on consumption.” Weak consumption baffled economists in the first quarter, especially because they purportedly saved so much money from lower gas prices.”
It underlies why the Fed has been warning that it will hike rates soon and that there is likely to be two rate rises this year in the US.
– On stocks the US market’s prices were higher earlier but fell back and declined steadily into the close with the big three indices ending down between 0.2% and 0.4%. In the UK stocks dropped a little after there was some selling of the miners. On the continent prices were mixed.
Here’s the overnight scoreboard (7.02am AEST):
- Dow Jones down 0.42% to 17,890
- Nasdaq down 0.2% to 5,112
- S&P 500 down 0.3% to 2,102
- London (FTSE 100) down 0.54% to 6,807
- Frankfurt (DAX) flat at 11,473
- Paris (CAC) down 0.07% to 5,041
- Tokyo (Nikkei) down 0.46% to 20,771
- Shanghai (composite) down 3.44% to 4,528
- Hong Kong (Hang Seng) down 0.95% to 27,145
- ASX Futures overnight (SPI September) -8 points to 5,554
- US 10 Year Bonds +4 points to 2.41%
- German 10 Year Bonds up 2 points to 0.87%
- Australian 10 year bonds up 3 to 3.08%%
- AUDUSD: 0.7730
- EURUSD: 1.1200
- USDJPY: 123.64
- GBPUSD: 1.5745
- USDCAD: 1.2323
- Crude: $59.65
- Gold: $1,173
- Dalian Iron Ore (September): 435
– On the local market it was a poor day yesterday with a fall on the physical of 1.0%, with 54 points leaving the ASX 200 index at 5,632. Overnight futures are only down eight points but as they showed the previous night, that’s not necessarily a great lead. For the technical traders the “candlesticks” will be suggesting further falls are possible. The miners were down in London, Dalian iron ore was down a percent and with Crude off a percent too we might be starting off on the back foot.
– In Asia yesterday the Nikkei was underwater all day. But that shouldn’t necessarily be a surprise coming off a fresh 19-year high. It’s clear sentiment in Tokyo is still pretty good.
That’s not necessarily the case in Shanghai though, with the index having an after lunch swoon. The high for the day was 4,720 before the big fall late in the day, which left the index down at 4,528. I know not everyone uses technicals in their trading but during the Asian currency crisis in the 1990’s I learnt when pegs were broken and forex rates let loose, they work. It was a real-time experiment that convinced me charts have to be part of any trader’s arsenal. Perhaps this chart of the break and retest of the break in Shanghai is a warning of a deeper fall. Either way more volatility seems guaranteed.
– On bond markets the tension between Greek disappointment and solid US data was in favour of the data — but only just. On forex markets recent ranges have been reinforced and it’s really just tooing and froing while traders wait to find out what is really happening in Greece.
– On commodity markets gold is sitting in the low $1,170’s now. That’s weird and you have to wonder what ever happened to gold as a safe haven in times of trouble? Crude was lower as it continues to trace through the $3-4 range and Dalian iron ore dipped back a little. Copper steadied no doubt on the back of the solidish US data.
– On the data front today there is a big dump coming from Japan with the release of CPI, unemployment, and household spending. Tonight is German import prices and the continuation of this week’s rolling Greek summit. BoE governor Carney is also talking — so watch out forex traders.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Bank shares have staged a good recovery over the past 3 weeks. Westpac, for example, is up about 7.5% on the low it established on Friday 5 June. However, the next couple of days might tell whether we are about to see a correction of this 7.5% rally.
The fact that we are moving quickly to fill the gap created by Tuesday’s strong opening is an ominous sign making this look like an “exhaustion gap”.
From here a move below the $33.17 peak I’ve labelled “3” would be another sign of weakness. This would confirm a view that the 7.5% rally is was an Elliot 5 wave advance and it has now been completed. If that’s the case, a correction of this advance could see Westpac move back to the 50% or 61.8% retracement zone between about $32.10 and $32.50. The 20 day moving average also provides support here. Even a move back to the 78.6% level around $31.60 would still be consistent with a temporary retracement of the uptrend.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC
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