“Fatigued investors” - that’s how Emma Lawson, NAB’s Senior FX Strategist, put it in her morning report this morning saying that markets drifted overnight slowly reversing the moves of previous days.
It is a repeat of what we have seen so often over an extended period of years now in this stock market rally – new Highs, slight reversal then onward and upward. The question of course is whether it will e the same or different this time but with Alcoa kicking off earnings season tonight in the US we might be about to get some decent news flow to drive markets and give an insight into the economy and company earnings.
Looking specifically then the Dow was down 44 points or 0.26% to 17,024, the Nasdaq dropped 0.76% to 4,452 and the S&P 500 fell 7 points or 0.37%.
My gut feel is that the pattern we have seen often in recent earnings seasons of a weak opening and then a recovery is on the cards again – at least the weaker opening – and this will drop the S&P 500 futures you can see in the chart below back toward the 1945/50 region initially.
Time for a rest?
I am instituting a small Euro short with a stop above last weeks high in the next 24-48 hours.
In the UK stocks fell 0.61% to 6,824. But on the continent weak German industrial production data (-1.8% versus +0.3% expected) knocked the DAX down 103 points or 1.03% while the CAC fell 1.41% and stocks in Milan fell 1.33% and those in Madrid dropped 1.09%. Part of the sell off also was the news that the newest member of the ECB Governing Council, Lautenschlaeger, spoke against asset purchases.
The impact of overnight moves has only been small on ASX futures trade with the September SPI 200 contract off just 4 points to 5474.
In Asia yesterday the Japanese leading economic indicator was a little lower than expected at 105.7 which added a little weight to the Nikkei’s fall but it felt more like the European and US selling started in Tokyo. At the close the Nikkei was 0.38% lower at 15,379 while stocks in Shanghai barely moved – closing at 2,060. Today we see Japanese trade.
A pullback and rejection of box extension seems likely.
On currency markets it was the Lautenschlaeger comment which seems to have outweighed the weak German data. But exactly what did the market expect the newest Bundesbank appointee to the ECB to say? Anyway Euro rallied a little and is back at 1.3604 this morning. Sterling was unable to kick on and has dipped back to 1.7126 while USDJPY has dipped back to 101.82. The Aussie fell initially yesterday but was rescued by the stronger data flow and has now rallied back to the 200 day moving average and sits at 0.9369 this morning.
Euro based lower unless 1.37 breaks.
On commodities the big news was on the Ags. It’s pouring in the WA wheat belt but more importantly in the US the good weekend weather has raised expectations of a bumper crop. Wheat fell 4.05%, corn dipped 1.80% and Soybeans were 1,78% lower.
Elsewhere September 62% Fe iron ore futures were $1.17 lower at $95.25 tonne. Newcastle September coal was off 15 cents to $70.35 tonne. July crude lost 0.64% to $103.39 Bbl, gold is at $1,320 oz with silver hanging onto $21 at $21.03. Copper closed at $3.25 lb.
On the data front I can’t wait to see what the NAB Business survey says at 11.30 today about confidence and conditions but also the employment index. Tonight in Europe we see German trade data which is really important along with french trade, UK industrial production and US consumer credit.
Greg McKenna
NB: Please note all references to rates above are approximate
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