Quick Recap: Mmm, it is going to be an interesting day in Asia today after US stocks eschewed the ebullience of traders in Japan, Hong Kong, Shanghai, Sydney, Singapore and London with a slide across the entire trading day which saw the big three US indices finish down more than 1% apiece.
That saw the ASX futures market get poleaxed last night with the September SPI pointing 86 points lower this morning and the December SPI down 74 points. Of course, all this has really done is reverse the most part of yesterday’s rally. But that’s the point isn’t it? The SPI hit resistance (target) overnight. I’ll outline the technicals below.
Besides oil getting hammered again, the Aussie dollar breaking its hourly uptrend yesterday afternoon and heading back under 70 cents this morning now that the RBNZ has cut rates again, and gold collapsing again toward $1,100 an ounce, the big news was Apple and its launch of the new Windows Surface clone, amongst other things. That didn’t appeal to investors though, and the fall in Apple weighed on the US market.
Forex trade this morning has been eventful due to the RBNZ’s decsion to cut. The Kiwi is down 1.53% since 7am AEST to 0.6283 and that has dragged the Aussie down close to half a per cent and under 70 cents again. The Canadian dollar has been left alone though this morning after a volatile night around the Bank of Canada announcement to leave rates on hold last night. The BoC seemed to signal no more moves toward cuts.
Today we get unemployment in Australia and given the volatility and its import to traders in forex, bonds, rates and stocks, there is plenty of potential for a decent move – in either direction – should the outcome be materially different from the market’s expectation of a rise of 5,000 jobs and an unemployment rate of 6.2%
The overnight scoreboard (7.30am AEST):
- Dow Jones -1.45% to 16,254
- Nasdaq -1.14% to 4,757
- S&P 500 -1.39% to 1,942
- London (FTSE 100) +1.35% to 6,229
- Frankfurt (DAX) +0.31% to 10,303
- Tokyo (Ni even thoukkei) +7.71% to 18,771
- Shanghai (composite) +2.29% to 3,243
- Hong Kong (Hang Seng) +4.10% to 22,131
- ASX Futures overnight (SPI December) -74 to 5,115
- AUDUSD: 0.6982
- EURUSD: 1.1204
- USDJPY: 120.47
- GBPUSD: 1.5360
- USDCAD: 1.3256
- Nymex Crude (front contract): $44.11
- Copper (US front contract): $2.4345
- Gold: $1,122
- Dalian Iron Ore (September): 467 (denominated in CNY)
- US 10 year bond rate: 2.19%
- Australian 10 year bond rate: 2.659%
– Now the news. The “reasons” given for why a market reverses are usually hard to pin down and often more nebulous that many explanations will admit. So it’s difficult to know exactly why the Dow, S&P and Nasdaq turned around last night. The NAB’s co-head of currency strategy Ray Attrill said it was not, however, the massive increase in job openings.
For those who have a life outside following the tick-by-tick gyrations in global markets at 5:00am, they would be forgiven for thinking that a surge in US job openings as reported in the JOLTS report (a known Yellen labour market favourite) and to its highest level since at least 2001 (Bloomberg data doesn’t go back further this) caused equity markets to freak out at heightened prospects of the Fed now proceeding to lift rates next week. That would be plain wrong. Equity (and bond yield) intra-day highs were in place at least an hour before the report was released.
One thing I would suggest however is that traders are watching technical levels very closely as a guide/roadmap/hint, as to where the market is headed at the moment. Indeed, Marketwatch ran an article this morning saying that the Dow’s bearish “symmetrical triangle” remains in force. I prefer the S&P myself. Whether you believe they work or not at least to some traders, they are offering a guidebook. So what might have occurred last night is that the market gapped higher, the S&P was 20 points higher at the open, tested resistance and then reversed course. Here’s the chart of the recent price action and the levels traders are watching.
Traders will respect either side of the wedge but this type of pattern is usually bearish.
– That move was important for the ASX as well, as we see in the overnight futures move. Yesterday’s 105 point rally in the physical market largely satisfied the technical target many traders would have had for this move at the moment. So today is likely to have a negative start and then wait for a lead from the unemployment rate and jobs growth at 11.30am AEST. If you’d like a preview of today’s data, David Scutt has one here.
– Speaking of Australian data, the economy and where it is headed, Peter Jolly, the NAB’s global head of markets research, wrote an excellent rebuttal to Paul Krugman and the other offshore doomsayers about the Australian economy. I’ve turned it into a slideshow you can find here.
– In other news, oil got crushed again and its price action (sell off, big rally, retest of multi year break of uptrend, and then crash again) seems to be one of the things keeping traders wary in other markets, because the set-ups are so similar. Last night, Nymex fell around 4% with BI New York’s Akin Oyedele saying that even though we got the EIA’s updated short-term outlook which showed oil production fell in the US by 140,000 Bbls in August over July’s production prices still fell.
– On the data front today, it’s Australian employment report day as highlighted above. In Japan, we get the release of machinery orders, foreign bond investment data and corporate goods prices. In China, we get CPI and money supply while the big news in Europe tonight is the MPC meeting outcome from the Bank of England. In the US, we get the release of import and export prices, non-farm payrolls and wholesale inventories.
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