Here’s hoping your Saturday is going well. Some ground to cover:
1. As the week closed it was still all about the US and the hope of agreement to enter into an agreement about the debt ceiling, which will be hit on October 17. The money will likely run out by the end of the month but stocks in the US, and consequently everywhere else around the world, are more optimistic. The Dow has rallied 444 points in the last two days of weekly trading and the S&P500 has broken back above the 1700 level with a close on the week of 1703. This keeps it in its uptrend channel – the bottom of which it bounced off this week.
The level to watch in futures terms are the top and bottom of this channel – the globe’s stock markets will follow.
2. The Chinese opened another swap line with a central bank in order to free up trade and investment into China. This latest one with the ECB is $350 billion coming on top of comments from Chinese Premier Li Keqiang that the US should get its house in order and the Shanghai free trade zone show a renewed push from China to internationalise the Yuan.
The UK Telegraph reported that Li “critcised the “pitiful” and self-inflicted political deadlock in America over raising the country’s borrowing limit, as … (he) added his voice to concerns that the world’s biggest economy could default on its debt.”
US policymakers need to take note – not only might they lose their AAA rating from all ratings agencies if this drags on but in time they just might lose the status of global reserve currency with a self-inflicted avoidable wound.
3. Something weird happened on the Sydney Futures Exchange overnight with massive volume in the 90-day bank bill, 3-year and 10-year bond contracts. Rumours from contacts in US markets suggest it is based on some big US funds sell-down exposure to the US Treasury market over the next 3 months and switching their exposure in Aussie dollars. The fact that massive volume went through but the price hardly moved suggests that this was that type of “handshake” deal.
4. Gold tanked, which is likely to impact on the ASX Monday, falling 2.2% to $1269 oz. The technicians out there suggest this is a big round trip back below $1200 oz and that if the low for the year breaks Gold could head below $900.
5. As positive as the markets have been into the end of the week which has buoyed both the Aussie dollar ($US0.9463, up 90 points on the low of the week) and the ASX and SPI 200 futures (5261, up 33 overnight and up around 180 points off the week’s low) neither the Aussie or the SPI 200 has taken out resistance just yet which means this is just noise within a range. Levels to watch are 0.9520 on the Aussie dollar and 5320 on the SPI 200 ASX futures. The higher the Aussie goes the more certain an RBA cut seems to be in the next 6 months. At a Colliers property briefing yesterday, Frank Allen – Westpac’s Director of Property – said the bank still thinks there are 2 more cuts coming and rates will need to head to 2% next year.
Have great weekend.
Follow Greg McKenna on Twitter.