– The US dollar and interest rates fell overnight after non-farm payrolls missed expectations. Stocks were also flat to down in the US and most of Europe before the weekend’s Greek referendum. That took the pressure off the Aussie and Kiwi dollars which were under heavy selling pressure in late Asian trade yesterday.
– The break up of the jobs data was interesting with the non-farm print of 223,000, just 10,000 under the 233,000 expectation. What was important was a 60,000 reduction to the previous month’s release. So, while the market didn’t exactly go into a funk, the US dollar falling, with everything else going on, seems a bit weird when the unemployment rate printed 5.3%. No doubt that is why the Euro and other currencies are off their highs. But, in the context of how wages flow through to spending and overall economic activity the fact that wages were flat in the month was important as well. Summing up the releases my US colleague Akin Oyedele reported that BNP Paribas economists said:
Today’s data will be seen by the market as slightly challenging a September rate hike, with the wages data likely to weigh more than the participation rate drive drop in the unemployment rate in affecting expectations.
The bigger picture is that jobs growth is good, unemployment is falling and wages lag the cycle, these data are no green light for September, but they are no red either.
– In other US economic news jobless claims printed a little weaker than expected at 281,000 against expectations of a fall to 270,000 after last week’s 271,000. Interestingly US factory orders fell again, down 1% against expectations of a fall of 0.5%. Excluding the volatile transportation component, orders increased 0.1% in May from -0.1% in April.
– Turning to Greece the IMF said, again, what we all know: Greece needs a big debt write off if it is ever to really get out from under its debt and economic problems.
“Using the thresholds agreed in November 2012, a haircut that yields a reduction in debt of over 30 per cent of GDP would be required to meet the November 2012 debt targets,” the IMF said.
That’s a big boost for Greek PM Tsipras and finance minister Varoufakis said overnight he’d rather cut his arm off then sign the deal and that he’ll resign if the Greek people vote Yes to the referendum.
Here’s the overnight scoreboard (7.30am AEST):
- Dow Jones down 0.16% to 17,730/li>
- Nasdaq down 0.08% to 5,009
- S&P 500 flat at 2,076
- London (FTSE 100) up 0.33% to 6,630
- Frankfurt (DAX) down 0.73% to 11,099
- Tokyo (Nikkei) up 0.95% to 20,522
- Shanghai (composite) down 3.49% to 3,912
- Hong Kong (Hang Seng) up 0.12% to 26,282
- ASX Futures overnight (SPI September) -19 point to 5,521
- US 10 Year Bonds -4 points to 2.38%
- German 10 Year Bonds +4 to 0.85%
- Australian 10 Year Bonds -2 points to 3.08%
- AUDUSD: 0.7625
- EURUSD: 1.1084
- USDJPY: 123.08
- GBPUSD: 1.5604
- USDCAD: 1.2540
- Crude: $56.50
- Gold: $1,165
- Dalian Iron Ore (September): 415.5
– The ASX has an interesting day yesterday up for the third session in a row on the back of some solid gains for the banks and miners. Fortescue was up more than 4%, but the big news was the huge rally in Pacific Brands, up around 50% and the 26% rise in Bluescope. Watch the Bluescope space again today.
Overnight futures traders are again suggesting that prices will fall today. Can the market again reject the futures lead in trade today? No doubt retail sales at 11.30am AEST will be a big part in determining where stocks close.
– In Asia yesterday we got to see more weakness in the Shanghai composite, which fell 3.49%. It could have been worse with the market down more than 5% at one point and it seems there is nothing the authorities can do to stop stocks from falling. The loudest sound in Shanghai at the moment is the sound of air rushing out of the bubble. The question now is where the market will find support.
– On commodity markets things were a little more subdued by gold remaining in the doldrums, with no-one buying. At $1,165 it faces falling to the years, and multi-year, lows in the $1,400s. Nymex crude remains under pressure, copper is $264 a pound, Dalian iron ore fairly calm around 415.5, but overnight US futures dropped more than $1 a tonne and the entire curve is now back under $50.
On the data front, retail sales for May are out in Australia today, the US is out for the 4th of July holiday, and in Asia and Europe it’s services PMI day – that includes the AIGroup’s Services PMI here in Australia.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Yesterday was a great day for shareholders smart enough to recognize the value in Pacific Brands. Congratulations to them. The owner of the Bonds; Sheridan and Berlei brands jumped 50% after announcing an upward revision in its guidance for the current financial year.
The announcement ticked all the boxes with better than expected sales; cost savings and debt reduction.
However, despite management’s good efforts, the business does face cyclical and structural issues not least of which is negative exposure to a weakening AUDUSD exchange rate. A large chunk of PBG’s costs are denominated in $US.
Bearing this in mind, the next level of chart resistance looks to be around 54-56c and consists of the December peak and 38.2% Fibonacci retracement of the major downtrend. Chart support begins at about 42c where the old trend line resistance currently intersects.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC