– Friday night’s big rise in US employment continued to reverberate around markets last night as traders worry about the when, not if, of the first Fed tightening. It’s not just that jobs are growing strongly once again but at the same time wages are starting to head higher.
– At the close US and European stocks were down. But in the case of the US the price action looks poor given that stocks were off their lows after a report from The Wall Street Journal on Monday afternoon said Greece’s international creditors suggested extending its bailout program until March 2016. But they dipped sharply into the days end of trade.
– But the Greek news and newswire’s attribution of a comment to President Obama that the strong US dollar was a problem saw the Euro surge overnight. The White House denied the comment. But, given that Obama was at the G7, where such topics are discussed, and given that the OECD just last week released a report saying the strong US dollar is a huge drag on US growth and corporate profits, it doesn’t seem unreasonable to assume something might have been said. The Euro surge and US dollar fall has helped the Aussie dollar back above 77 cents this morning.
Here’s the overnight scoreboard (7.20am AEST):
- Dow Jones down 0.46% to 17,766
- Nasdaq down 0.92% to 5,021
- S&P 500 down 0.65% to 2,079
- London (FTSE 100) down 0.21% to 6,790
- Frankfurt (DAX) down 1.18% to 11,064
- Paris (CAC) down 1.28% to 4,857
- Tokyo (Nikkei) flat at 20,457
- Shanghai (composite) up 2.17% to 5,131
- Hong Kong (Hang Seng) up 0.21% to 27,316
- ASX Futures Overnight (SPI June) -26 to 5,474
- US 10 Year Bonds -3 points to 2.38%
- German 10 Year Bonds +4 to 0.89%
- Australian 10 year bonds +9 to 3.06%%
- AUDUSD: 0.7695
- EURUSD: 1.1291
- USDJPY: 124.48
- GBPUSD: 1.5347
- USDCAD: 1.2408
- Crude: $58.33
- Gold: $1,173
- Dalian Iron Ore (September): 436
-The ASX looks like it’s going to open under pressure again today if the futures are any guide. Last week’s price action on the ASX200 index was weak with multiple levels giving way. That gives the market a poor technical outlook. It’s already down 8% from the highs but where the bottom is on this run is as yet unclear given continued pressure on the Major banks, which make up around 27% of the index.
– In China yesterday Shanghai stocks rocketed again as the market awaits the MSCI decision today whether to include China A shares in its emerging market index. Reuters reported that if MSCI makes this move $US400 billion will flow into the Chinese stock market as fund managers are forced to adjust their positions and buy. Gerry Alfonso, director at Shenwen Hongyuan Securiites told Reuters, “investors seem to be building positions ahead of the announcement”.
– On bond markets the selloff continues. The US was a little better last night but with non-farms so strong and the US economy looking like the Fed might have been right about the Q1 weakness, the overall tone is one of higher rates. Having said that, last night US 10’s dipped a little from Friday’s post data highs. German, Italian and Spanish rates all rose as well. Here at home the market has been dragged higher by the moves in the US.
– On commodity markets the outlook for gold looks terrible given it cant rally on anything at the moment. Whether its geopolitics, uncertainty or even a little swoon in the US dollar the price continues to gradually slip. This is one of the most intriguing prices in markets at the moment. Crude’s not such a conundrum though. OPEC can’t constrain itself and the Chinese trade data yesterday showed fuel imports down. So Nymex crude fell 1.42% to $58.29. Copper was at $2.72 a pound and Dalian September iron ore was at 435.
On the data front Chinese CPI today could be a big event for markets. But closer to home we have the NAB’s Business Confidence survey, ANZ Job Ads and home loan data. Tonight we’ll see Inflation report hearings in the UK and EU GDP for Q1 before the NFIB Business survey in the US and the JOLTS survey.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Fortescue Metals (FMG)
There’s been plenty of volatility in Fortescue recently as the market as the market reacts to the stubborn upward correction in iron ore prices and last week’s press reports that the company is considering shoring up its balance sheet by selling equity in its Chichester iron hub.
For chartists, the stock is showing signs of forming a triangle formation. If this interpretation is correct, a return to test the base line around $2 could be on the cards.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC