Stocks pressured as global data picks up, Aussie should rally

December 3, 2013

Archimedes would have a hard time squaring this circle as stocks fell even though the global economic backdrop is improving and has improved in developed nations in particular.

Yesterday we saw that pretty much every major jurisdiction either matched or exceeded last month’s PMI numbers and the UK and the US in particular stand out as very strong results with the UK PMI printing 58.4while the ISM in the US was 57.3. Both were much stronger than expected.

But the key here is that this is a market where good economic news is likely to put the breaks on Fed, Bank or England and or ECB monetary largesse so stocks didn’t take the solid PMI releases that well.

At the European close the FTSE was down 0.84% to 6,595, the DAX was down just 0.04% the CAC fell 0.21% but stocks in Milan and Madrid came under heavy selling falling 1.52% and 0.93% respectively.

In the US the Dow is down 0.48% to 16,009, the Nasdaq off 0.37% to 4,045 and the S&P has just lost 5 points toward the end of day and sits back at 1801, down 0.27%.

On the ASX this morning at 8am AEDT the Dec SPI 200 contract is down another 24 points to 5,260 as the decline accelerates. This is a shot duck market and there is possibly another 200 points in this sell off.

On global FX markets the US dollar got a little bit of its mojo back from the strong ISM figures with USDJPY now above 103 and on its way to 104 at least. GBP is off a high of 1.6442 (not a typo) back at 1.6352 this morning and Euro sits at 1.3541 after a brief foray above 1.36 at one stage.

The Aussie was hit back from strength which saw a high at 0.9168 and traded down to a low of 0.9086 early this morning. It now sits at 0.9102.

The RBA’s intervention and jawboning in the FX market was a big part of the Aussie’s fall over the month of November and with the RBA Board meeting today I guess there will be some fears that the Governor hooks in again.

Of course he might but as the NAB FX guys wrote yesterday much of the ceiling and the RBA sentiment is baked in the cake and it might be time for a bounce.

I’ve gone long this morning at 0.9104 as you can see on the chart above – I stayed away from the buying yesterday and my stop is below the big trend line that stretches back to the 2008 low.

This is a big picture play so it might take some time to work through but if the global economy is really starting to heal and if Chinese growth is going to be stronger than many expect then the RBA and its Governor have done a great service to the Australian economy in jawboning the Aussie lower so that any rally has a lower start and end point.

What a wild ride Bitcoin was in our time zone yesterday. Early doors down below $850 and then back up above $1100 later in the day and it sits at $1078 this morning. Amazing ranges and price action – instability reigns. It seems to reign in the gold market as well with the yellow metal falling more than $30 to $1219 oz just when it looked like it might have found support in the $1240/50 region.

So yesterday I contemplated buying some gold – thankfully I did not, yet anyway.

Gold fell out of bed last night with an unexpected $30 loss and it is now testing the long long term trend line we talked about yesterday – if it breaks then ouch there is another $50 off straight away and then we’ll see.

Silver lost 4.23% to $19.14 Nymex crude rallied $1.25 to $93.97 (Australian petrol prices on the up with the Aussie down) and copper sat at $3.22 lb. On the Ags corn was 0.30% higher but wheat and soybeans fell 0.8% and 1.2% respectively.

ON the data front it is another big day for Australian traders with retail sales and the RBA Board meeting. No one expects the RBA to move rates but the language around the economic stimulus and the Aussie dollars level will be interesting to traders trying to read the tea leaves.

Elsewhere we get the Chinese non-manufacturing PMI, house prices and construction PMI in the UK, New York ISM in the US along with the Redbook index and the IBD economic optimism index.

Have a great day and good hunting

Greg

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NB: Please note all references to rates above are approximate and should not be used for trade reference

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