Neither stocks not FX traders care about economic reality at the moment because if they did stocks would be lower and the US dollar higher. rather what everything is about at the moment is free money and low interest rates as FOMC Chair Janet Yellen proved once again overnight with here comments that in the US “a high degree of monetary accommodation remains warranted” which drove the Dow and S&P higher.
At the close the Dow and S&P rallied 0.72% and 0.55% respectively with the Dow closing at 16,519 up 118 and the S&P closing at 1,878 up 10. At the same time the US 10 year yield closed at 2.59% close to this years low.
Tech shares lagged again and there are some fears that a head and shoulders pattern is forming in the market as Sam Ro from Business Insider US showed in his piece earlier this morning. Such a pattern will be watched closely by traders and could see the Nasdaq head toward 3600 from the 4068 level it closed at this morning.
In Europe it was a volatile session but the diplomacy from Russian President Putin who said that he had pulled back troops from the Russian border and the solid moves in the S&P and Dow helped the DAX close up 0.56% to 6,796 even though factory orders tanked 2.8% in March. The CAC rose 0.4% and the FTSE was essentially unchanged. In Milan stocks fell 1.3% while in Madrid they were 0.64% lower.
Tying it all together and we see that after a weak day on the ASX yesterday where it closed down 45.6 points the futures market is more ebullient overnight with the SPI 200 June contract up 31 points to 5451. Last week overnight futures trade proved ephemeral in our trading day so we’ll see how it goes today.
On currency markets the US dollar did a little better overnight as trader figured out, after German factory orders, that maybe the Euro near 1.40 is over the odds. It sits this morning at 1.3911. The Pound is down a little as well but still very strong at 1.6952 while USDJPY is at 101.89. For the Aussie dollar some selling has come in from the highs of yesterday but it was very strong in light of the weaker than expected retail sales data. It sits at 0.9332 awaiting labour force data today.
Chartwise the key level on the downside – if the data is weak – is 0.9274. Topside on a solid number there is plenty of room to rally toward 0.94 and then 0.9450/60
On commodity markets Nymex crude bounced 1.23% to $100.72 Bbl, gold lost 1.5% to $1,289 and copper lost 2 cents a pound to $3.05. Corn fell 0.49%, wheat dropped 0.27% and soybeans lost 0.89%.
On the data front it is going to be a huge day for markets in Asia with the release of Australian employment data (mkt Exp +9,500) along with the Chinese trade data before we head to Europe for german industrial production and the Bank of England policy decision which will be followed soon after by the ECB decision. In the US jobless claims is the key data release.
Have a great day
Greg
NB: Please note all references to rates above are approximate
To learn more about Greg McKenna, read on here.