USDJPY holds the key in Asia today after another tough night for stocks

April 14, 2014

The market selloff continued on Friday night amidst numerous calls of not to worry or be worried about this recent hiccup from the all time highs. It is an interesting time for stocks with a certain complacency about recent price action which has lead me to go 100% in my superannuation.

Not for a minute am I suggesting you do the same but for me the psychology of this pullback and the fact that it is difficult for people to find a catalyst or explain (much like 1987) makes me even more worried as we get stories  that say don’t worry about this selloff and the stories that say this pullback is necessary.

Both angles smack of complacency which just might help feed the psychology of a big fall.

Anyway as it stands this the SPI 200 June contract fell 14 points on Friday night suggesting a weaker open again today on the local stock market after stocks in the US fell again Friday.

“It’s the rotation stupid” seems to be the meme that many are using to shrug this weakness off as the leaders of the rally are sold equally though JP Morgans poor earnings were a signal that other US stocks still have their issues and this earnings season is crucial in being solid to help hold the market up.

In the end the Dow fell 143 points or 0.89% to 16,027, the NASDAQ lost 1.33% to 4000 and the S&P 500 fell another 17 points for a loss of 0.93% to 1,816 with trader eyeing the 1800 level cautiously.

A break of 1800 would be troubling

Data in the US wasn’t too bad which actually could be the issue given that producer prices rose by 0.5% in March against expectations of a rise of just 0.1% which is the biggest lift in 9 months and music to a Fed worried about deflation ears. Consumer sentiment was also at a 9 month high of 82.6 in April. No signs of tapering the taper there.

Ukraine – Reuters

Europe had a bad days trade Friday also with the FTSE down 1.20% to 6,562, the DAX dropped 1.48% to 9,315 and the CAC fell 1.08% to 4,366. In Milan and Madrid stocks fell 1.08% and 1.27% respectively.

Speaking of Europe Ukraine is hotting up again with separatists active in the Eastern region seizing buildings. Traders will be keeping an eye on things especially after Russian President Putin’s belligerent speech about Ukrainian Gas debts Friday night.

All of which suggests another day of selling on Asian stock markets again today after what was a poor day Friday with the down 2.38% assailed by fears of a rerun of the economic collapse that followed the last tax hike back in the late 90′s and a Yen which strengthened once again. At the close it was off 340 points or 2.38% to 13,960. The Hang Seng was 0.79% lower at 23,004 and in Shanghai stocks fell a more modest 0.15% as the Chinese exchange continues to march to the beat of its own drum. There is no material data flow in the big Asian markets today although Chinese FDI and new loans will be released.

On Forex markets the risk off feeling is driving the Yen higher and has taken the gloss off the Aussie dollar a little. The Yen has opened this morning at 101.60ish with traders eyeing support under 101.50 as a trigger for more selling and no doubt another Nikkei fall.

101.50 needs to hold on a day close basis

For the Aussie it is holding in very well all things considered at 0.9382 and while the momentum may be fading there is no wholesale sellers on the horizon at the moment. Euro pulled back as Bundesbank President Weidman was reported to be in favour of ECB QE on Friday night but it is also still strong at 1.3838 this morning while the Pound sits at 1.6716.

On commodities Nymex crude is strong at $103.33 and a clear handbrake on global growth. Gold hasn’t moved much and sits at $1,318 oz while copper is at $3.07 lb. The Ags were all lower with Corn falling 0.55%, wheat down 0.3% and soybeans off 1.3%.

On the data front it is quiet day in Australia with nothing of note to be released before Italian CPI and EU industrial production tonight with US retail sales for March the big data release tonight.

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