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

– It’s earning season in the US and while no one big reported overnight there seems to be a bit of concern over the impact of the much stronger US dollar on earnings during the quarter. That’s the feeling this morning after stocks drifted lower in the US, UK and Germany. Brian Fenske, head of sales and trading at ITG New York told Reuters heading into earnings season “we’ve had a few warning signs last week from a couple of companies where the impact of foreign exchange is going to be greater than what was previously thought.” Concern over earnings is usual in the early part of the season. What’s going to be interesting is whether the fear gives way to relief once earnings start to flow or whether, as Bank of America suggested last week, the US is heading into an earnings recession.

– No such fears in China however as the disconnect between the economy and Shanghai, and now Hong Kong stocks, is almost complete. Yesterday’s miss on Trade, where both exports and imports underperformed expectations, was a real canary-in-the-coal-mine moment for many China observers. It appeared to confirm the growing series of anecdotal and other indicators, suggesting China is slowing faster than many expect. On that basis it’s worth revisiting this scary outlook for Chinese growth that will send shudders through Australian miners and Treasurer Joe Hockey.

– But traders are addicted to the momentum of the rally in Shanghai stocks and also hopes of further stimulus. By the close of play, and after a brief selloff in the immediate aftermath of the weak trade data, the Shanghai Composite was up 2.16% to 4,121 while stocks in Hong Kong closed above 28,000 up 2.73% at 28,016. Amazing. Trend followers will be killing it.

– Getting back to the US and it’s worth noting that San Francisco Fed President John Williams, a man close to Fed Chair Janet Yellen, was on the hustings again last night reinforcing the notion that the Fed IS going tighten sooner rather than later. He said the risks of moving rates now had lessened as the economy had strengthened but for mine this is the key quote in his Reuters interview:

More importantly, we are really thinking about a path, we are talking about moving interest rates from zero to a normal level over several years… so even if the economy got some bad shocks, really you are probably just talking about flattening that path out a bit, or maybe raising rates more slowly.

That means the Fed wants to hike but recognises the move will not be a linear one.

– Greece is still in the news and has denied an FT article saying it is readying itself for a debt default if talks with creditors fail. But time is running out, again, for Greece it seems. As I noted yesterday EU officials are tired of the Greek “taxi driver” approach of asking for more money. They are also tired of being made to look like fools by the grandstanding of Greek Finance Minister. To us here in Australia that may seem like a normal day in politics but many of the Northern European EU members seem genuinely affronted with the Greek approach. I expect we’ll hear more of this over the next few weeks.

Here’s the overnight scoreboard (6.50 am AET):

  • Dow Jones down 0.45% to 17,977
  • Nasdaq down 0.15% to 4,988
  • S&P 500 down 0.46% to 2,092
  • London (FTSE 100) down 0.36% to 7,064
  • Frankfurt (DAX) down 0.29% to 12,338
  • Paris (CAC) down 0.26% to 5,254
  • Tokyo (Nikkei) flat at 19,905
  • Shanghai (composite) up 2.16% to 4,121
  • Hong Kong (Hang Seng) up 2.73% to 28,016
  • ASX Futures (SPI June) down 8 to 5,936
  • AUDUSD: 0.7586
  • EURUSD: 1.0564
  • USDJPY: 120.14
  • GBPUSD: 1.4674
  • USDCAD: 1.2592
  • Crude: $52.01
  • Gold: $1,198

– On the ASX today we’ll get the competing forces of the disappointment of another failure at 6,000 yesterday, the reversal that ensued, last night’s dip in global markets and, on the positive side, the fact that iron ore has bounce a little, up 3.43% on the Dalian exchange yesterday. Futures are indicating a small fall on the day and the technicals agree that this is the likely path of trade.

– In Asia yesterday the weakness in Chinese exports was amazing, but not unexpected for those of us who watch China closely. China is slowing fast as the twin headwinds of a corruption crack down and a desire to reposition growth toward consumption work their way through the economy. It’s worth revisiting the Morgan Stanley outlook for Chinese growth.

– On forex markets yesterday the Aussie and Kiwi came under heavy selling pressure in the wake of weak Chinese data. European traders didn’t like the data either, knocking the Aussie all the way down to 0.7546 before it found a little bit of support. Euro was under pressure as well as the market recognises that the Fed seems to be going regardless of what many, myself included, might be an economy too weak to sustain rate hikes. Euro touched a low of 1.0517, just 50 pips above the lows for the year. The Yen is becalmed and the Pound took a beating before climbing off the mat. The market is genuinely concerned about the tightness of the UK election on May 7.

– On commodity markets it was better news for iron ore miners and crude oil producers with both commodities rallying. Oil had the lesser of the gains with a rise of 0.66% to $52.01 but September iron ore on the Dalian exchange rose 3.43% to 392. That’s a solid recovery from recent lows, particularly in the face of weak Chinese data yesterday. Gold fell again and at $1,198 is back below $1,200 while copper lost a little bit of ground to $2.739.

– On the data front today in Australia we’ll get ANZ weekly consumer confidence before the NAB Business survey at 11.30am. New Loans is out in China and will be watched closely. Tonight we see a huge raft of inflation data released, including US and UK PPI, UK CPI, German WPI, and Spanish CPI. But, it’s US retail sales that seem likely to be the big event of the evening. The market is looking for 1.1% month on month for March after last month’s 0.6% fall.

And now from CMC Markets’ Ric Spooner is today’s Stock of the Day:


Yesterday’s price action in BHP looks weak from a chart point of view.

The market finished close to its low creating a relatively large red candle that broke below the 78.6% Fibonacci retracement level. It did this after rejecting the 20 day moving average which has done a pretty good job of defining BHP’s trend so far this year.

Looking for possible support levels from here a couple are on the near term horizon. First is the 78.6% retracement of the larger uptrend around $25.16. Below that, the January low at $26.50 comes back into play.

Ric Spooner, chief market analyst, CMC Markets.

You can follow Ric on Twitter @ricspooner_CMC

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