– A very interesting night on markets. One of those nights that suggests a change may be moving through. In summary, US retail sales printed a solid 0.9% growth rate but that was less than the 1.1% expected. This, combined with the big IMF downgrade to its US growth forecast for 2015 to 3.1% from 3.6%, saw the US dollar come under heavy pressure. US dollar selling also helped lift oil. But more likely than not Iran’s entreaty to OPEC to cut production by at least 5% was what really resonated with traders.
– On forex markets the US dollar had been really firing in European trade before the reversal hit. At that point Euro, Aussie and other currencies were being hammered down toward the lows of the year. But a huge beat on expectations for EU industrial production for February — with a print of 1.1% against 0.4% — combined with the US data to see some solid bounces from the lows. Euro is back at 1.0653, around 100 points higher than this time yesterday. The Aussie is at 0.7624 around half a cent higher and USDJPY is down at 119.39, 80 points below this time yesterday. Helping the Yen were comments from a noted Abe adviser who said it may have overshot at current prices.
– What’s important about the retail sales data and the IMF downgrade is not that they foretell a weak US economy. Rather, the US economy is simply not as strong as many believed it would be just three or four months ago. Marc Chandler global head of currency strategy at Brown Brothers Harriman in New York told Reuters he “wouldn’t be surprised if people bring down Q1 GDP forecasts on the data.” That will impact Fed expectations and thus the dollar.
– Worth noting from Mike Bird in BI UK is fears of a Bubble in stocks and bonds have hit their highest level on record, according to the Bank of America Merrill Lynch’s latest survey of 145 fund managers who control $US494 billion in assets.
Here’s the overnight scoreboard (7.50 am AET):
- Dow Jones up 0.33% to 18,036
- Nasdaq down 0.22% to 4,977
- S&P 500 up 0.16% to 2,095
- London (FTSE 100) up 0.16% to 7,075
- Frankfurt (DAX) down 0.9% to 12,227
- Paris (CAC) down 0.69% to 5,218
- Tokyo (Nikkei) flat at 19,908
- Shanghai (composite) only up 0.34% in the end at 4,135
- Hong Kong (Hang Seng) down 1.62% to 27,561
- ASX Futures (SPI June) +11 to 5936
- AUDUSD: 0.7623
- EURUSD: 1.0654
- USDJPY: 119.34
- GBPUSD: 1.4776
- USDCAD: 1.2488
- Crude: $53.44
- Gold: $1,193
– The ASX should be fairly quiet today before the release of the Chinese Q1 GDP data. Once that comes out anything could happen. But Crown could come under scrutiny given the move by Macau to reduce visitor numbers by around 10 million and make it a more family friendly place. With the big rally in oil energy stocks should do better and iron ore has had a good couple of days as well.
– In Asia yesterday Shanghai and Hong Kong had a bad afternoon’s trade. Shanghai had been up around 1% before the afternoon pullback. There is lots of talk of bubbles in the Western press and even locals are a little concerned. But Twitter told us that Citibank reckons Shanghai won’t be a bubble until the index doubles. Shanghai 8000 has a nice ring to it. As with the Australian market, the release of Chinese GDP and associated data is key today. David Scutt has a great preview you can find here.
– On commodity markets there is nothing like a bit of US dollar selling to lift the foot off the throat of formerly wounded prices. Oil is up $53.29 for a gain of 2.95%. Copper has dipped again and is at $2.71 but iron ore is acting like all the bad news is in the price — up another 3 pips overnight to 395 on the Dalian exchange. Newcastle Coal for September rose $1.05 a tonne to $53.75.
– On the data front today in Australia we get Westpac Consumer Sentiment data at 10.30am. At midday we’ll get Chinese GDP and associated data while tonight we receive German and French CPI and an ECB statement and press conference. We’ll also get a Bank of Canada decision tonight along with US industrial production, a speech from James Bullard and then the Fed beige book in the morning.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day:
There’s a bit of angst about Carsales.com and the potential for revenue to miss expectations if the economy slows. But interest rates are low and yesterday’s pick up in NAB’s business conditions index was an encouraging development. It’s a reminder that there’s also a risk of being too gloomy about revenue conditions for cyclical companies like Carsales.
Cyclical risk also has to be weighed against Carsales.com’s long term structural growth prospects, especially given its footholds in Brazil; South Korea and elsewhere in Asia.
Against this background, Carsales has returned to the top end of a potential support zone which gives it a place in my list of stocks to watch.
Ric Spooner, chief market analyst, CMC Markets.
You can follow Ric on Twitter @ricspooner_CMC