Forget last night, watch Chinese GDP today

April 16, 2014

Last night is far less important than today when we see the release of Chinese Q1 GDP which  is the fulcrum around which the next moves in markets will pivot.

It is an especially big risk for stocks and the Aussie dollar, noting that risk has two sides both upside and downside. The market is looking for a slowdown in growth year on year from 7.7% to 7.3% for Q1 with 1.4% actual growth in the quarter. Retail sales are also out but of secondary importance to the GDP.

I have no idea which way the data will print, whether it will print on, above or below expectations. But even if I did it is not always easy to know exactly what the market will do. But my guess is lower growth equals stock and Aussie selling anf probably Yen buying with the reverse the case if its a higher number.

Anyway today is one of those days you should keep your tin hats on and have your stops in the market.

Anyway turning to the overnight moves and we see that stocks were up then down then back up for a nice little round trip which after two days of afternnon buying suggests bulls are more comfortable with things at the moment.

This left the Dow up 0.55% or 90 points at 16,263, the Nasdaq was up 0.28% to 4,034 and the S&P 500′s recovery continued up another 12 points to 1,843 for a gain 05 0.68%. In the context of the US inflation data last night which was slightly higher than expected and thus reinforces the Fed taper this is a pretty solid result.

Locally current indications, based on futures trade are for a flatish open for the Australian stock market today which, after rising 0.5% yesterday saw an 8 point gain in the June SPI 200 futures contract. This is even though miners were under pressure in the UK after commodity price falls overnight.

But while China is probably the key driver today keep an eye on Ukraine.  Russian President Putin seemed to be stirring the pot again overnight saying both that he couldn’t recognise those in power in Kiev but they needed to do something or Ukraine was going to head toward civil war.

In Europe these tensions over Ukraine which seem to escalating took their toll along with the price action in metals markets which took miners and thus UK shares lower. At the close the FTSE was down 0.63% to 6,542 but on the continent things were a bit weaker after the disappointment of the ZEW economic sentiment surveys for Germany (43.2) and EU wide (61.2) disappointed. This combined with Ukraine to see the DAX down 1.77% to 9,174 while the CAC fell 0.90% to 4,345. In Milan stocks were hammered 2.33% lower while stocks in Madrid fell 0.83%.

On currency markets it was fairly boring for a change save the Aussie dollar which came under pressure after the RBA minutes were released yesterday and is now down about 70 points from the high at 0.9352 this morning. Euro is at 1.3812 and USDJPY at 101.84 while the Pound is at 1.6724.

Commodities were not boring with a report that Chinese demand for gold will stabilise this year knocking the price 2% lower to $1,302 even though the very same report talked of bright demand going forward and tensions in Ukraine rise. Which of course is a bit ugly for the bulls. Copper lost 4 cents or 1.45% to $3.02 while Nymex crude sits at $103.74 this morning. On the Ags it was volatility again with wheat up 3.39%, soybeans rose 1.69% but corn was quiet up just 0.15%.

On the data front it will be all about Chinese GDP today. Tonight we get EU wide CPI which is important for the Euro and expectations of an ECB cut or QE. In the US building permits, housing starts and industrial production are out as well as a number of Fed speeches.

Have  a great day and good hunting

Greg

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