The Calming words of the new Fed Boss ignite a Stock and Aussie rally, Gold tagged along for the ride

February 12, 2014

Interesting moves overnight and you have to wonder why the heck the market sold off if it was going to rise back so strongly on nothing but bad news on the employment front and confirmation from new Fed Chair Janet Yellen that she is going to continue tapering.

Sure she said that rates were going to stay where they are but realistically how do you square the big falls and rally from a fundamental point of view? you just can’t really can you.

Anyway it was a solid start from Yellen to her tenure as Fed Chair with markets applauding her calm resolve to continue with the path that she and the rest of the Fed set under previous Chair Ben Bernanke. She noted “I expect a great deal of continuity in the FOMC’s approach to monetary policy.”

At the close its been another solid rise with the Dow up 193 points for a rise of 1.22%, the Nasdaq is 1.03 points higher and the S&P has roared through 1800 rising 20 points to 1819 or 1.06%.

This S&P 500 rally may seem uncomfortable and inexplicable fundamentally but it fits with my system and while I haven’t been on it, neither was I short or would short yet.

In Europe stocks roared higher as well with the FTSE up 1.24%, the DAX rose 2.04% and the CAC was 1.08% higher a figure that was replicated in Madrid with Milanese stocks up 1.04%.

Locally on the ASX Futures overnight the SPI 200 March contract is up 45 points to 5247 bid.

5265 is the big number to watch as topside resistance.

On global FX markets it was another day of strong AUD gains after the NAB Business survey and home loan and housing data. Many commentators liked to focus on the number of loans which was down but it’s the value which caught my eye and likely the RBA’s as well. So this morning the AUDUSD is up 0.97% to 0.9035.

The Aussie has rallied hard, 3 cents in a week but it’s not over cooked yet – 0.9091 seems a reasonable target.

The Euro is down a smidge at 1.3635, GBP is up 0.3% to 1.6449 while the USD gained against the Yen with USDJPY rising to 102.64.

On commodities Gold’s rally continued with the break of the recent high emboldening bulls and it’s up another 1.2% to $1291.80 this morning. Nymex crude is holding near $100 Bbl at $99.87 this morning while Dr Copper is down a cent at $3.26 lb. On the Ags Corn fell 0.34%, Wheat rose 0.94% and Soybeans rose 0.7%.

On the data front today we get the Westpac – Melbourne Consumer Confidence data , Machine orders out of Japan and loans and trade from China. Tonight the focus will be on the BoE inflation report and Governor Carney will be speaking. Indian industrial and manufacturing output will be released.

Mario Draghi’s speech tonight will also be keenly awaited.

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