Good morning. Here’s the score so far.
– The US dollar was stronger overnight, mostly European morning, as concerns over Greece kicked off from the start of trade. This bias was then reinforced with a solid ISM print for May in the US. The print of 52.8, up from 51.5 last and 52 expected, and the big beat in construction spending which was up 2.2% showed the US economy might be as strong as the Fed is postulating in this second quarter. Personal consumption was flat but incomes rose 0.4% while inflation, as measured by PCE price index, was up 1.2%.
– It seems that US stocks were higher because the data suggests the economy is strong enough to deal with the first Fed hike. That’s what Peter Cardillo, chef market economist at Rockwell Global Capital told Reuters anyway. But Yale professor Robert Shiller is easing toward calling the market a bubble. You can see his comments here.
– In Europe, stocks were mixed with the ECB, IMF, France and Germany meeting in Berlin to try to nut out Greece’s fate. On the whole, the data flow in Europe was a tiny bit disappointing with the Markit manufacturing PMIs a little flat. German CPI remains well contained with a rise of 0.1% in May.
– Looking back at the US dollar, which in Dollar Index terms rose 0.56%, it was universally stronger across the board. Euro, sterling, CAD and yen were all off similar amounts around 0.57% while the Aussie is down 0.41% and the Kiwi, after a bad end to the week last week, fell only 0.28%. The Aussie is slipping again and made a low just under 76 cents last night in the generalised US dollar weakness. The yen’s acute weakness is one of the big stories in global markets – last night’s highs, indeed the current level, are the highest since 2002.
– The RBA will be a big hurdle for the Aussie today. Will the governor’s statement reflect a renewed, and explicit, easing bias or will the board retain the soft bias that seems to exist at the moment? The words Glenn Stevens chooses to use today can help guide the Aussie dollar lower, or not as may be the case, if Stevens uses the right language to signal more cuts are on the table.
Here’s the overnight scoreboard (7.30am AEST):
- Dow Jones up 0.16% to 18,040
- Nasdaq up 0.25% to 5,082
- S&P 500 up 0.21% to 2,111
- London (FTSE 100) down 0.44% to 6,953
- Frankfurt (DAX) up 0.19% to 11,436
- Paris (CAC) up 0.35% to 5,025
- Tokyo (Nikkei) flattish 20,569
- Shanghai (composite) Boing, can’t keep a good bull down – up 4.72% to 4,829
- Hong Kong (Hang Seng) up 0.63% to 27,597
- ASX Futures Overnight (SPI June) -15 to 5,744
- US 10 Year Bond down 2.18%
- Australian 10 year bond up 2.76%
- AUDUSD: 0.7603
- EURUSD: 1.0924
- USDJPY: 124.78
- GBPUSD: 1.5201
- USDCAD: 1.2516
- Crude: $60.28
- Gold: $1,189
- Dalian Iron Ore (September): 422
– The local markets yesterday fell out of bed from the get go. It suggested that Friday’s counter-intuitive strong rally might have been more about month-end positioning. I hadn’t considered that, given Libor and FX probes but the price action over the two days has been somewhat intriguing nonetheless. Futures overnight are pointing to a better day today.
– In Asia, there is nothing like a couple of days’ rest and a slightly disappointing read on the manufacturing sector to get the bulls in Shanghai charging again. There are some fundamental reasons why Shanghai shares might keep on keeping on – including larger weights in global equity indices and some new ones being set up. Indeed, for technical traders the recovery from Friday’s lows looks like it could signal a strong resurgence. It would be confirmed if last week’s high is taken out.
– On commodity markets, oil was down a little, Dalian iron ore is back up at 441 looking strong and benefiting from the overall bullish tone in Chinese markets. Gold remains becalmed around $1189 and copper has drifted back t0 $2.73.
– On data, the RBA at 2.30pm is the big one today in Australia. Look at the last paragraph to guage whether we have a soft easing bias or something more explicit. We also have Korean CPI released, while Australia’s quarterly current account will feed into GDP tomorrow. Tonight we get German unemployment,UK CPI, EU CPI, US Redbook and ISM New York.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
JB Hi-Fi – budget impact losing steam
JB Hi-Fi is likely to be one of the big beneficiaries of the Budget’s small business depreciation measures. Micro business owners will all be upgrading their computers and phones if they haven’t already done so since the budget.
The impact of the budget on JB Hi-Fi’s share price is pretty obvious on the chart below. That’s when it made the vertical departure from the trend line and 50 day moving average. However, this uptrend has lost momentum over the past couple of weeks.
This loss of momentum is now showing up in divergence between the share price and the RSI in the box below the chart. The RSI is a momentum oscillator and it’s now starting to make lower highs. If it closes below the dashed support line in the near future, the RSI will also be making lower lows signalling that JBH’s share price could be in for a downward correction.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC