A quick recap:
An interesting night on global stock markets last night. After the weakness in Chinese inflation data yesterday, you could have been forgiven for thinking that because this was yet another sign of a stumble economy, stocks might get sold.
But the first signs that traders were going to ignore the data and try to take stocks higher came on our own ASX’s late afternoon rally. Having made a 1-month low at 5,047 yesterday, the market dragged itself back to finish the day at 5,099. That was a loss of just 20 points or 0.4%. That’s a long way from the 1.1% loss the futures indicated yesterday morning.
So it was in Europe and the US overnight, where the early weakness was reversed. The Dow and S&P managed to finish in the black but the Nasdaq was a little lower. Likewise, the FTSE is really struggling at the moment relative to other markets and it finished in the red while continental Europe mostly made small gains.
The wash-up for the ASX futures is that after trading through a 39-point range overnight, the December SPI200 contract is up 6 points to 5,081. The price action of the last 24 hours has allowed the ASX, and the SPI200, to cling to the support from the August low.
On forex markets, there was plenty of action with a speech by Jens Weidmann, which highlighted rates can’t stay low forever in the Euro, having little impact as the single currency slipped down below 1.07, another new 6-month low, before recovering 1.07 this morning. USDJPY is fairly quiet and the pound has barely budged from this time yesterday. The Aussie, however, came under a bit of pressure and is back at the week’s lows but this is small bikkies in the scheme of things in terms of the range for the week. Support for the Australian dollar is in the 0.6990 region.
On commodity markets, Nymex crude found support in the same support zone it has for a couple of months now and is back above $44 a barrel. That said, it’s hardly strong. Copper is slipping again though and at $2.2190 a pound it is at the lowest levels since 2009. That makes sense given that the OECD said growth this year is going to be the weakest it has been since 2009. But traders might want to keep an eye on Dr Copper and what she knows about the global economy. Iron ore slipped a little as well.
On bonds, US 2s dipped a couple of points to 0.87%, while 10s were also down a couple of points to 2.33%. Australian 10s closed at 2.88%.
On the data front today, we get the Westpac Consumer sentiment survey and then it’s Chinese retail sales, industrial production and urban investment. These are vitally important for traders. Wholesale prices are out in Germany while UK employment data is a big one tonight. Likewise for speeches by BoE governor Mark Carney and his ECB counterpart Mario Draghi.
It’s Veteran’s Day in the US.
The overnight scoreboard (8.03am AEDT, NB: US MArket close is 8am AEDT):
- Dow Jones Industrials +0.16% to 17758
- Nasdaq Composite -0.24% to 5,083
- S&P 500 +0.15% to 2081
- London (FTSE 100) -0.32% to 6275
- Frankfurt (DAX) +0.16% to 10832
- Tokyo (Nikkei) +0.15% to 19671
- Shanghai (composite)-0.12% to 3642
- Hong Kong (Hang Seng)-1.43% to 22401
- ASX Futures overnight (SPI December) +6
- AUDUSD: 0.7027
- EURUSD: 1.0716
- USDJPY: 123.20
- GBPUSD: 1.5115
- USDCAD: 1.3259
- Nymex Crude (front contract): $44.17
- Copper (US front contract): $2.21
- Gold: $1,088
- Dalian Iron Ore (January): 347.5 (denominated in CNY)
- US 10-year bond rate: 2.33%
- Australian 10-year bond rate: 2.89%
– It’s almost impossible to be a complete trader in Australia and not trade the SPI200, or ASX200 index in some form. That’s because it’s a great index that moves around and offers plenty of opportunities. So if you are a trader who looks at the index as a whole then you need to read this great article David Scutt wrote covering Morgan Stanley’s call that the Big 4 just can’t keep up their massive dividend payouts. Of course, that’s just their call. But it’s important for the majors themselves and the index as a whole given their weightings in the ASX 50, 100 and 200.
– Regular readers know I’m watching bonds closely, sentiment toward bonds, and especially the 1% and 2.5% levels in the US 2-year and 10-year bond rates respectively. So I was interested to see an article in the Wall Street Journal this morning which highlighted that bond investors are getting bearish.
Here’s what the Journal said:
Investors are the most bearish on U.S. government bond prices in more than three months. The ostensible reason? A Fed statement and an October jobs report that has convinced most that the Federal Reserve will raise rates next month.
J.P.Morgan Chase & Co.’s weekly Treasury client survey showed ther percentage of investors expecting lower bond prices, known as shorts, rose to 33% for the week ended Monday from 24% a week earlier. The percentage expecting higher bond prices, known as longs, also increased to 20% from 13%.
The net differential between the two camps – known as net short – widened to 13%. That is the most net short since Aug. 3.
You can read the full story here.
– Yesterday we highlighted the risk to the EU and the Euro from the political situation in Portugal. Last night, BI UK’s Mike Bird updated the story from where he sits, noting that Portugal’s government is about to be ousted by a coalition that includes two of Europe’s most left-wing parties. You can read more here. It’s no surprise euro is a little weaker; I don’t think it is ALL about interest rate differentials.
Here’s what the NAB’s David deGaris, who alerted us to the situation, had to say this morning:
As we reported yesterday, the Portuguese government has now capitulated with the formation of the left wing coalition of parties. It remains to be seen whether this change of government reportedly on an anti-austerity platform will cause another bout of volatility as far as the Euro is concerned; it bears very close watching. So far at least, the Euro has been affected little, mainly on the back foot overnight but at the expense of the US dollar.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Online travel group, Webjet goes into its AGM today having enjoyed a 46% share price rally since early September.
However, the light blue Bollinger Bands on the chart below are flashing a potential warning sign. This is might turn out to be an example of John Bollinger’s famous “M” reversal set up. If a trend peak is made at current levels, it will be below the upper Bollinger Band indicating relatively modest standard deviation from the mean. The last peak on the other hand was made outside the upper band indicating strong momentum.
This behaviour provides a clue thatm, in momentum terms, price is behaving like a double top or “M” formation even though it doesn’t look like it to the naked eye. In these circumstances, the stock is potentially vulnerable to any minor disappointment with a break below the 20 day moving average signalling a downward correction.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC
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