A very strange night last night with stocks up in the US and bonds down – both on weak US data. It seems like markets are focused on Jeff Gundlach’s view that the recent run of data will see the Fed Taper the Taper – that is stop reducing its bond purchases.
Which implies that bad news is good news again, at least for stocks which means bad news is bad news for the US dollar
Data wise overnight German Consumer Prices fell 0.6% in January which while as expected hints that the negative rates that ECB member Coeure discussed yesterday must really be on the table regardless of what Mario Draghi says about Europe not being Japan.
In the US jobless claims ticked up a little to 339,000 but it was the miss on retail sales which printed -0.4% (versus already anaemic expectations of no rise over the month) that really suggests US economic momentum has started to fade. But that didn’t bother stocks with the Dow, Nasdaq and S&P 500 all in solid positive territory at the close. The Dow is up 0.4%, the Nasdaq 0.95% and the S&p 500 is up another 11 points or 0.59% to 1830.
In Europe things were more mixed with the FTSE down 0.24% weighed down by a Lloyds loss for the year and Rolls Royce guidance. On the continent it was more positive except in Italy with Milanese stocks down 0.17% after the PM resigned when his party ganged up on him. The DAX rose 0.6%, the CAC rose 0.17% and in Madrid stocks were 0.17% higher.
Locally on the SFE overnight the SPI 200 contract continued its solid recovery from last week’s move under 5000 with a rise of another 34 points to 5297 bid.
On FX markets the US dollar suffered against the Euro and Sterling which both rose. The Euro is up 0.64% to 1.3679 and Sterling sits at 1.6657 up 0.39%. It lost ground against the Swiss as well falling 0.77% to ).8937 while the Yen strengthened a little with USDJPY falling 0.26% to 102.25. The Aussie benefited from this USD weakness and rallied back to 0.89990 this morning still down 0.45% on yesterday but a lot stronger than the low of 0.8924 after the weak employment data. A strong Swissie and higher gold suggest this is not an environment to get too aggressive Aussie.
The Aussie dollar looks like it is caught between levels. The Aussie basically satisfied the type of round turn move I like to see the other day before turning lower after the data yesterday and then bouncing strongly off what could be seen as an old neckline for a reverse head and shoulder move.
The outlook is clear – if it breaks the orange line for a daily close it is going to roar for a couple of cents toward the 200 day moving average but their recent high is solid resistance - likewise 89 is the convergence zone of the fast and slow moving averages which are actually just crossing over into a bull signal so only a breach of that turns the outlook heavily negative.
On commodities gold has regained $1300 for the first time since November 2013 and is up 0.93% to $1301.68 this morning.
So I’m still long gold and it is homing in on the first big resistance for some time and resistance that it would be unusual to burst through the first time or with ease.
That level of course is the 200 day moving average so I’ll be taking profit around there I think and then seeing where its goes.
Longer term my target is $1362 and then we’ll see.
Nymex Crude is still atop $ 100 at $100.28 and Coppersits at $3.31 lb. On the Ags wheat and soybean fairly roared up 1.36% and 1.46% respectively while wheat lagged up just 0.11%.
On the data front today we have a speech by RBA Assistant Governor Kent before Chinese CPI data and then French, German, Italian and EU wide GDP tonight which should be interesting. US industrial production and capacity utilization is also out.
Have a great day and good hunting
Greg
NB: Please note all references to rates above are approximate
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