Aussie and stocks higher as Markets bounce and risk comes on again – for the moment

February 7, 2014

Lets face it the continued rally we are seeing in markets is a natural reaction to the sell off we have had but with non-farm payrolls out tonight and and a big resistance level in the S&P 500 looming overhead it could be another big 24 hours.

Overall though it was a better night on stocks with all there of the main US indices up more than 1%. At the close the Dow has risen 1.21%, the Nasdaq rose 1.13% and the S&P 500 rose 21 points or 1.22% to 1,773. In futures terms the S&P 500 contract sits at 1,766 and is retesting the 15 month trendline that it broke down from over the past week.

Non farm payrolls tonight is likely to determine whether or not the S&P can break higher – and in doing so drag risk appetite with it.

The zone is 1774 – 1782. A break of the latter can drive it higher but it has to break.

The ECB left rates unchanged and Mario Draghi declared once again that Europe was not Japan when it comes to deflation. So there is no easing but in a classic door ajar moment Draghi said, “lending is stabilising: things may get better, or they may stay where they are. Or they may get worse”. Perfect!

SO with US stocks higher European stocks also rose and at the close the FTSE is up 1.55%, the DAX rose 1.54% and the CAC was 1.71% higher. In Madrid stocks roared 1.94% while the FTSEMIB in Milan soared 2.28%.

The ASX did well also with a strong rally in trade yesterday with a further rise of 34 points in futures trade overnight which left the March SPI 200 at 5115 bid. That about 120 points over th low of just the day before in terms of futures trade.

On global FX markets Euro bounced sharply to a high of 1.3619 before pulling back to 1.3585 for a gain of 0.4%, GBP was unchanged on the day resting at 1.6318 while the better performance on stocks and risk appetite rose 0.68% to 102.12. The Aussie is also up rising 0.58% after yesterdays solid trade and retail sales data. It sits at 0.8960 this morning awaiting what the RBA might say about it in the quarterly Statement on Monetary Policy at 11.30 am AEDT this morning.

The Aussie 4 hour charts are over cooked and I have sold some Aussie again overnight on the back of this looking for a move to 0.8920 and if that breaks back to 0.8870.

On commodity markets Nymex crude was up 0.46%, gold largely unchanged at $1257 and copper soared 4 cents to $3.25 lb. On the Ags corn was flat, wheat fell 1.15% and soybeans rose 0.7%.

Data tonight and today will be dominated by the RBA’s SoMP and then NFP in the US. We also have the AiG performance of construction index in Australia the HSBC Chinese services PMI and German and French trade data. In the UK industrial production and trade are out.

It’s all about non-farm payrolls tonight so tin hats and option cover are a must.

Have a great day and good hunting

Greg

Don’t forget you can follow me on Twitter @gregorymckenna

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