It was night dominated by M&A activity in the European Pharmaceutical industry which drove shares in companies like Astra-Zeneca and Glaxo SmithKline higher and took European bourses to solid rises. This helped drag US stocks into their 6th day of rallies and has left the local market up 26 points in overnight futures trade on the ASX with the June SPI 200 contract at 5497 bid.
This generalised risk on atmosphere has helped the Aussie dollar rise as well and it is trading at 0.9367 this morning. Indeed it is interesting how the Aussie was sold into the weekend but bought back yesterday – perhaps it is expectations that today’s CPI is going to be another big number suggesting the RBA will have to increase rates sooner rather than later or perhaps it is just a generalised view that the Aussie is the place to be.
It is a strong uptrend as the chart above shows and it is also a market that found support at my fast moving average. So it is a market with a slight upward bias but equally a market that will have two big hurdles today in the CPI and Chinese Flash PMI today.
Levels to watch are 93 cents on the bottom after the support at 0.9327 which is the daily fast ma. Topside, which based on expectations of a rise above 3% is the key risk is 94 cents, 0.9435 and then 0.9480/90.
Turning back to the overnight markets data in the US was positive with the Richmond Fed Manufacturing index surging from -7 to +7 in April while existing home sales fell 0.2% to 4.59 million annual rate but still better than expected. Home prices as measured by the FHFA rose 0.6% in February.
At the close the Dow was up 65 points for a gain of 0.39% to 16,514. The Naasdaq rose 0.96% to 4,161 and the S&P 500 was up another 8 points to 1,880 for a gain of 0.43%.
In Europe at the close the DAX leapt 2.02% to 9,600, the CAC rose 1.18% to 4,484 while the FTSE lagged a little up just 0.86% to 6,682. In Milan and Madrid stocks rose 1.49% and 1.41% respectively.
After another poor day in Asia yesterday traders will be hoping this positivity rubs off on sentiment in our time zone with the Nikkei down 0.85% in trade. Shanghai shares rose 0.35% which isn’t much of a reaction to the Government’s move to free up lending in the rural sector by cutting the reserve requirement for banks to this sector. Today is potentially huge with the release of the “flash” estimate for the HSBC Chinese Manufacturing PMI.
FX markets were fairly subdued and the US dollar didn’t kick on with the strength that many, myself included, thought it would after the close into the Easter break. The Euro snuck back above 1.38 and sits at 1.3804 this morning, the pound is at 1.6825 while USDJPY is essentially unchanged at 102.60.
On commodity markets things were much more positive than the night before but Nymex crude fell 2.15%, $2.24 Bbl, to $101.69. Gold is down at $1,282.30 Oz while copper rose a cent to $3.08 lb. On the Ags soybeans lost 1.25%, while corn and wheat rose 1.59% and 0.71% respectively.
Gold is looking ugly again and at risk of a cascade lower if you look at the chart above – there is a real risk of a big $20-30 fall if recent support at $1,275/77 gives way
On the data front today is huge for Australia with the release of first quarter CPI. The previous data was highish and fears are that this data will take the year on year rate well through the top of the rBA’s 2-3% band – We’ll know at 11.30 AET this morning. 15 minutes later Chinese Flash PMI will be released so it is going to be a pretty busy time around lunchtime today.
Tonight we get the global flash PMI from Europe and the US as well as the BoE minutes and new home sales in the US.
Greg
NB: Please note all references to rates above are approximate
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