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

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– Greece paid the EUR 750 million it needed to but did so by dipping into its emergency reserve. That spooked markets in Europe a little as the argy bargy over Greece is subtly escalating. The IMF is in Greece’s corner insofar as it said it won’t be part of a new deal unless there is some sort of haircut for Greek debt. That puts them squarely at odds with Germany and Europe, which is a worry. Not unexpectedly, traders reacted by selling European bonds and stocks. Strangely, this helped the Euro.

– In the US bonds were sold early in line with European bonds and the US 10 year Treasury traded through important resistance for a while before rallying back to finish 2 points lower in yield (higher in price) on the day. No such luck for European bonds, however, they did finish significantly lower than their highs of the day.

– Speaking of interest rates there was more evidence overnight that the first Fed hike is not too far away. San Francisco Fed President John Williams said he believed the Fed should hike sooner rather than later. Part of the reason is he doesn’t think the tightening cycle needs to be overly aggressive and this informs his view its time to start. The key part of William’s speech addresses this point:

The first thing to point out is that when the Fed raises rates, it will not be instituting tight policy, merely easing back on exceptionally accommodative policy. We’ve had over six years of this stance, and accommodation will continue to characterise monetary policy for some time. Rate rises will likely be gradual, and the Fed’s $US4 trillion-plus balance sheet will continue to provide substantial stimulus. We’re not pulling the rug out from underneath the economy.

It’s worth noting Williams is also looking through Q1 economic weakness: “We need to look at data over the longer term. We can’t get distracted by blips and temporary downs — or ups for that matter,” he said.

– On the data front, there was a pretty good flow from the US. “The NFIB small business optimism index rose from 95.2 to 96.9 in April. The JOLTS job openings index fell from 5.133 million to 4.944m in March. And the Redbook survey of chain store sales was up 2.1% in the latest week on a year ago, up from 1.6%” economist Craig James said.

Here’s the overnight scoreboard (7.30am AEST):

  • Dow Jones down 0.2% to 18,068
  • Nasdaq down 0.35% to 4,976
  • S&P 500 down 0.29% to 2,099
  • London (FTSE 100) down 1.37% to 6,933
  • Frankfurt (DAX) down 1.72% to 11,472
  • Paris (CAC) down 1.06% to 4,974
  • Tokyo (Nikkei) flat at 19,624
  • Shanghai (composite) up another 1.58% to 4,401
  • Hong Kong (Hang Seng) down 1.12% to 27,407
  • ASX Futures (SPI June) -16 to 5,652
  • AUDUSD: 0.7980
  • EURUSD: 1.1215
  • USDJPY: 119.82
  • GBPUSD: 1.5669 BOOM!
  • USDCAD: 1.2000
  • Crude: $60.75
  • Gold: $1,193
  • Dalian Iron Ore (September): 438.5

– On the local market it’s going to be an interesting day as traders grapple with the downdraft of offshore influences but try to pick through ASX listed companies that are likely to benefit from the Governments budget. On balance, futures traders had the SPI 200 down 16 points to 5652. The support at the 200 day moving average remains.

– In Asia yesterday Shanghai was higher once again but the Nikkei was flat. David Scutt highlighted this in our Asian day afternoon wrap yesterday noting, “As it has done since the PBOC cut interest rates Sunday evening the Shanghai Composite continued to push higher, adding an additional 1.5%. Including the final hour of trade on Friday the index has now put on in excess of 6%.”

– On bond markets US 10’s finished down 3 points at 2.25%. That’s well below the 2.36% high and an important rejection of the break of the big post ‘taper tantrum downtrend. German 10’s were up 6 points to 0.68% but again that’s much better than the high of the day. UK 10’s are back at 2% and Spanish and Italian bonds also came under pressure. Aussie 10’s look set to open around 3.03%.

– Forex traders seemed to like the rise in German and other European yields which helped the Euro back up above 1.12. The Aussie dollar is up at 0.7973, USDJPY is still becalmed at 119,82 and Sterling is still ripping higher at 1.5669. AUDNZD is up at 1.0820!

Crude Oil (Go Markets, MT4)

– Crude oil (and the Aussie dollar) is a great example of why all traders should at least look at basic charts if making short term decisions. Over the past few days Nymex crude has been drifting lower but has continued to hold support, while last night Nymex crude rallied 3.43%. CommSec chief economist Craig James said the catalyst was OPEC lifting “its 2015 world oil demand growth forecast from 1.17 million barrels per day to 1.18m.” Technical traders knew there was support. Elsewhere, gold rallied to $1193, while copper lifted to $2.94.

– On the data front today one of the more interesting releases might actually be the RBNZ’s financial stability report. That’s because they both have a rampant housing market and a banking sector dominated by Aussie banks. The wage price index is also out and we’re still waiting on Chinese loan data. Chinese retail sales are also due and this, along with industrial production and urban investment, will be the highlight of today’s data calendar. Tonight in Europe we get French, German, Italian, Portugeuse and EU GDP, along with German CPI. In the UK we get employment data and BoE Governor Mark Carney is speaking. In the US we get very important retail sales.

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

Virgin Australia Holdings (VAH.AX)

It was a good day for Qantas yesterday, with markets responding positively to its investor presentation and the potential for a return to dividend payments. Part of Qantas’s turnaround involves an improvement in its cost position compared to competitors but it also reflects an improvement in the overall domestic market.

With this in mind, my stock to watch today is Virgin Australia. Virgin’s average costs are also benefitting from the end of the capacity war with Qantas while lower fuel prices are a plus as well.

48c looks a potential support level for Virgin. It includes:

  • The early January peak where there is potential for the old resistance to become new support
  • The 61.8% Fibonacci retracement of the last major swing higher
  • The level where the last swing lower would be the same length as the previous one (AB=CD on the chart below)

If Virgin drifts down to this level and bounces off it, there looks a reasonable prospect of a return to the 52-54c range.

Ric Spooner, chief market analyst, CMC Markets

You can follow Ric on Twitter @ricspooner_CMC

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