– Wall street was down marginally overnight, even though earnings from Goldman Sachs and Netflix beat expectations. What seems to be worrying traders according to Reuters is that while 73% of the 51 companies that reported have beaten expectations on earnings, only 47% have improved revenue. That’s a tiny sample. But Uri Landesman, president of Platinum Partners in New York, told Reuters “This is a pricy market. It needs earnings to sustain it, and the earnings need to be sustained by strong demand. Right now I’m not thrilled with the level of revenue growth we’re seeing.” In Europe stocks were mostly lower with continuing concerns about Greece after German Finance Minster Wolfgang Schaeuble said “Nobody expects that there will be a solution for Greece in April”.
– On the data front in the US housing starts missed to the downside while jobless claims rose more than expected. Fed Vice Chair Stanley Fischer reiterated that the Fed is looking through recent weakness and is still on track to hike rates this year. This means the beat on the Philly Fed is likely to be a more important focus.
– Besides Fischer’s strong statement that the Fed will be raising rates this year the other huge news in global markets is that German 10 year bonds have rallied again, closing at 0.09%. This kind of makes sense if you run to the German safe haven in times of trouble and with concerns about Greece. But wow rates out to 10 years in German at or below zero is ridiculous. US 10’s closed at 1.89% and UK rates closed at 1.63%.
Here’s the overnight scoreboard (7.44 am AET):
- Dow Jones down 0.04% to 18,105
- Nasdaq down 0.06% to 5,007
- S&P 500 down 0.08% to 2,104
- London (FTSE 100) down 0.51% to 7,060
- Frankfurt (DAX) down 1.9% to 11,998
- Paris (CAC) down 0.57% to 5,224
- Tokyo (Nikkei) up 0.08% to 19,885
- Shanghai (composite) up 2.71% to 4,194
- Hong Kong (Hang Seng) up 0.44% to 27,739
- ASX Futures (SPI June) -6 at 5,934
- AUDUSD: 0.7793
- EURUSD: 1.0762
- USDJPY: 118.86
- GBPUSD: 1.4934
- USDCAD: 1.2188
- Crude: $56.53
- Gold: $1,197
– Yesterday in Asia Shanghai stocks ripped higher once again as hopes for more stimulus fed through the market and the wall of money on the sidelines is being put to work. What’s incredible, and has many foreigners shaking their heads and screaming bubble, is that Shanghai stocks are rallying hard even as the economy continues to slow, and slow sharply. But even though the market does look very frothy the retail money coming in is in many ways similar to the wall of money that flowed in US, Japanese and European markets with the QE programs of the respective central banks. The Shanghai wall of money is likely to be less stable, making the market more vulnerable and while the PBOC and its political masters continue to ease, stocks might defy western observers for an extended period.
– On forex markets the US dollar has lost more ground across the board. The amazing thing about that is it’s against a backdrop of Greek troubles resurfacing and German bonds rallying toward zero. But Stanley Fischer’s comments last night certainly pulled the US dollar bears up a little short — for the moment anyway. For the Aussie we have a combination of the US dollar move and the much stronger than expected jobs data. I’m optimistic on the Australian growth story, more so than most, so this rally might have further legs unless the US dollar strengthens once again. That’s not the view of RBA Board member John Edwards though. he told the WSJ that while yesterday’s jobs data was “unambiguously good” it was his view that GDP growth is not strong enough to lower the job rate too far.
– On commodities gold was up on the back of the US dollar move. But it’s still trading at a $20-$30 range. Crude is up even though
On the data front today it’s quiet in Australia but we get really important CPI data in the US tonight. Unemployment data is also out in the UK and in Canada retails sales and CPI are out.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day:
Qantas shares hit turbulence yesterday in the form of the sharp pop in oil prices.
This saw the share price back off the zone of resistance around the top of the trend channel on the chart below. It looks to me like you can make an Elliot 5 wave interpretation of Qantas’s fantastic uptrend. If this is correct, the support formed by the previous peak at “3” and potentially the trend channel support is pretty important.
If the current correction finishes above this support at 3.12, there’s plenty of scope for more upside. However, a break below this level could signal that a significantly deeper correction is in prospect.
Ric Spooner, chief market analyst, CMC Markets.
You can follow Ric on Twitter @ricspooner_CMC