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


– After a few days of bond market carnage and stocks under pressure, markets around the globe had a better night of it with bond and stock prices rising and the US dollar rallying. It seems, beside the better results for Alibaba and yelp apparently putting itself up for sale, the key driver of last night’s move was the improvement in bonds. Quote of the day goes to Art Hogan, chief market strategist at Wunderlich Securities in New York, who told Reuters, “drastic, draconian move in bonds and violent updraft in oil are settling a little bit and that’s helping us focus on stocks.”

– That’s a great quote and in it is the kernel of what might actually be driving markets at the moment. The recovery in oil, which peaked on this run the night before last, is driving expectations both about inflation and about the growth pulse that might be supporting that recovery in prices. That has hurt bonds and threatened stocks. So oil’s pullback — its now under $59 down from above $62 two nights ago — takes a lot of pressure off markets here and now. BUT, don’t forget Janet Yellen’s warning from two nights ago — stocks AND bonds are expensive at the moment.

– Anyway, that’s for another day… or perhaps tonight, depending on the results of non-farm payrolls. Last nights jobless claims of 265,000 was only a smidge over last week’s 15 year low of 262,000 and much better than the 280,000 the market expected. To a certain extent that mitigates concerns, which arose after the weak ADP data on Wednesday, about non-farm payrolls for April to be released tonight.

– But the big news now is that exit polls suggest the conservatives are going to win the UK election. As a result the Pound is up 200 points from where it was a little while ago and back above 1.54. It’s dangerous to trade on exit polls rather than actual polls but if it’s right then Sterling’s price action this week sets up a very strong rally. On the flip side a YouGov exit poll appears to have given Labour plus SNP the edge :S

Here’s the overnight scoreboard (7.15am AEST):

  • Dow Jones up 0.46% to 17,924
  • Nasdaq up 0.53% to 4,945
  • S&P 500 up 0.38% to 2,088
  • London (FTSE 100) down 0.19% to 6,886
  • Frankfurt (DAX) up 0.51% 11,407
  • Paris (CAC) down 0.29% to 4,967
  • Tokyo (Nikkei) 19,291
  • Shanghai (composite) down 2.75% to 4,112
  • Hong Kong (Hang Seng) down 1.27% to 27,289
  • ASX Futures (SPI June) -1 to 5,613
  • AUDUSD: 0.7906
  • EURUSD: 1.1263
  • USDJPY: 119.69
  • GBPUSD: 1.5389
  • USDCAD: 1.2122
  • Crude: $58.97
  • Gold: $1,183

– The local market yesterday bounced right off the 200-day moving average. That’s important for technical traders who seem to be driving this bus as much as anything else. Yesterday the banks recovered a little and last night’s move in the US will also help. But the fabric of the market, in a technical sense, has been damaged. This implies traders will be wary of getting too bullish on the local market unless there is a sharp and solid recovery offshore. On a fundamental basis, given the banks make up so much of the ASX index, the fact that Australian bank profits on loans are being crushed will hold the index back.

– In Asia yesterday the carnage on Shanghai continued. Morgan Stanley, which has been one of the big cheerleaders of the Chinese rally has changed their call on the market. That’s big news as Morgan Stanley’s Jonathan F Garner and his Asia/Pacific team have downgraded the MSCI China stock exchange to equal weight after almost seven and a half years of betting it will outperform. Regardless, the technical outlook is terrible.

– On commodites, as discussed above, the big news is the crash — mini-crash really — of oil, which is back under $60. It looks very much like a top to the technical traders, suggesting further declines. $57.93 is the key support now. Gold can’t take a trick and is back at $1,184. Dalian iron ore is off a little at 430.

– On the data front today it’s huge, with the market hanging on the release of the RBA’s SoMP at 11.30am. Traders will be looking for forward guidance but this is often a backward-looking document. Chinese trade is equally huge, as is German trade and IP tonight. But the big one is non-farm payrolls.

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

Asciano (AIO.ASX)

Freight group Asciano, released its quarterly volume update yesterday and maintained its existing guidance for EBIT growth to exceed the 5% achieved in F14. Asciano is on the hunt for acquisitions or other growth opportunities but management provided assurance that this would not be at the expense of current plans to increase the dividend payout ratio.

On a negative day for the broader market, this news was good enough to see Asciano’s share price bounce neatly off trend line support. The current valuation looks undemanding at around 14.7 times F16 earnings giving the stock a decent chance of rejecting this support and returning to test the top of the trend channel around $6.80.

Ric Spooner, chief market analyst, CMC Markets

You can follow Ric on Twitter @ricspooner_CMC

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