Bonds reverse, new highs for stocks and a big Aussie dollar rally

May 30, 2014

Another interesting night overnight if you trade stocks and more proof you can’t kill this rally with a stick.

I really like the way my favourite market analyst, Graeme Jarvis – Director GCM Strategy at Westpac, summed everything up this morning when he wrote “last night was a calm night that saw tight trading in credit,… a hint of exhaustion in US 10yr yields, an AUD breaking out of its rangey funk and an equity market that just has not seen a high it does not want to better.”

So stocks in the US rallied with the Dow up 66 points or 0.4% to 16,699, the Nasdaq rose 0.54% and the S&P 500 just keeps keeping on rising 10 points for a 0.54% gain to 1,920.

Where Jarvis is dead on the money is when he talks about the stock rally in the context of what was disappointing data overnight in the US. The second read of Q1 GDP printed at -1% from the minimalist expansion of 0.01% that had been reported previously. Clearly this has been dismissed as entirely weather related. Also out was jobless claims which fell to 300,000 last week and April’s pending home sales which rose 0.4% against 1% expected.

In Europe with the Ascension day holiday across a fair chunk of the continent there was only light trade. The FTSE 100 rose 0.29% to 6,871 the DAX rested at 9,939 and the CAC likewise at 4,531 while in Milan stocks fell 0.35% and in Madrid 0.21%.

On the ASX overnight the June SPI 200 contract rose 10 points to 5,541 bid on fairly light volume. On the bond boards the 3′s fell 3 points to 97.21 (2.79%) with the 10′s down the same amount finishing at 96.335 (3.665%).

On currency markets the Aussie dollar is the big winner over the past 24 hours with a rally igniting after the stronger than expected rise in the second estimate of 2014-15 Capex and the upgrade to Q1 GDP expectations due next Wednesday. This morning the Aussie is at 0.9304 up 80 points on the lows of yesterday.

The current 0.9304/10 region is resistance as it is the 200 period moving average on the 4 hour charts but above that 0.9346 is the key.

Elsewhere Euro is up a tiny bit at 1.3602 and the Pound is likewise mostly unchanged at 1.6715, USDJPY sits at 101.75.

On commodity markets gold remains pressured at $1,255 this morning. The outlook for gold is, in the short term, somewhat bleak. Nymex June crude is up 0.84% to $103.51 (note change of contract) while copper is off a few cents to $3.15 lb. Silver is down in sympathy with gold at $19.00 oz. On the Ags soybeans were largely unchanged but wheat fell around 1% and corn was down 0.65%.

On the data front today private sector credit is due out today in Australia along with the Japanese data. Tonight German retail sales are due out along with Italian CPI and PPI, Canadian GDP and in the US personal consumption and spending data along with the Chicago PMI and speeches from Fed and FOMC members Laker, Williams and Plosser.

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