Even though it was a better night for stocks in the US overnight and the Aussie dollar found a bit of a bid after the retail sales yesterday it was a fairly complex interaction of forces which saw the recently very strong correlation against all the big markets further break down with divergent performances across markets and even within jurisdictions such as Europe.
The fall in the DAX continued after the technical break last week we highlighted again yesterday and Spanish stocks were lower after a disappointing unemployment report but the CAC and Milanese stocks rose.
What does it mean?
It suggests to me that the big macro pulse of Fed QE is giving way to a recognition that as the Fed moves to raise rates markets will need to stand on their own legs. Tentative and as speculative as this hypothesis might be it feels like this is where the markets are headed.
Of course if the ECB does something with its own QE this week all bets may be off – but for now this is the market we are dealt.
Turning back to the US and the good economic news was that the ISM manufacturing index for New York riped higher to 68.1 from 60.5 and is another sign that the US economic recovery is gaining a more solid footing. Helping also according to the NAB was “Berkshire Hathaway shares that rose 3.1% posted record quarterly profits. Doing no harm to investor sentiment, the Fed’s latest quarterly Survey of Senior Loan Officers released this morning reported “a continued easing of lending standards and terms for many types of loan categories amid a broad-based pickup in loan demand”.
So at the close the Dow was up 0.46% at 16,569, the Nasdaq rose 0.72% to 4,384 and the S&P 500 rose a solid 14 points for a gain of 0.72% to 1,939.
In Europe the FTSE was largely unchanged but the DAX technical break continued with the index closing at 9,154, down 0.61%. This was in spite of the bail out of Banco Esporito by the Portuguese government. However the data on investor confidence released in the Sentix survey was not good showing a drop to 2.7 from 10.1. Elsewhere the CAC rose 0.34% while stocks in Milan were up just 0.09%. Spanish stocks were lower however down 0.17% – depressed by disappointing employment data.
Locally the ASX futures market was was 4 points overnight with the SPI 200 at 5,488 this morning after a fall of 0.3% on the physical yesterday. The miners such as Arrium and Atlas Iron will probably have another good day though.
Is that a range bottom or will the SPI head lower?
On currency markets the Aussie was higher overnight to 0.9331 in a continuation of a little technically induced bounce. Euro is at 1.3420 and Sterling 1.6860. USDJPY is at 102.58. Boring, boring, boring.
Euro – bottoming for the moment?
Iron ore for September leapt $1.42 tonne to $95.92 while September Newcastle coal climbed 55 cents to $69.85 tonne even though the news out of China suggested that Beijing is going to ban coal use in six provinces from 2020.
August Nymex crude arrested its recent free fall rallying 54 cents to $98.42 Bbl, gold is see-sawing in a range and sits at $1,288 while silver is at $20.17 oz and copper climbed 3 cents to $3.24 lb. The Ags were universally positive for a change with corn, wheat and soybeans up 1.77%, 1.82% and 1.44% respectively.
On the data front today the big one domestically is the RBA Board meeting and decision on interest rates. Virtually no-one expects the RBA to move today nor for the Governor’s statement at 2.30pm to materially deviate from the rhetoric of the post few months. Of interest though will be any jawboning of the Aussie dollar after the success the Kiwi’s had recently and comments about consumers and domestic growth. Trade and the AiG Performance of Services are also out.
Offshore the Markit and HSBC services PMI are out around the world along with EU retail sales tonight and US factory orders.