Stocks climbed higher once more overnight as the benign pro-stock environment continued – the market is getting exxcited now and the pundits are talking about Dow 15,000. Nothing like Dow 36,000 that we saw more than a decade ago but remarkable nonetheless in the current global economic environment where the IMF just this morning has downgraded its expectation for US growth from 2% for 2013 to just 1.7%.
But it’s not about the economy is it, it’s not about a low growth profile, its only about earnings at the margin but it is about free money and finding somewhere to put it. So we remain at the mercy of central bankers but as the Bitcoin debacle has shown this week markets are still markets and crowds still have manias so we should always be on guard.
Microsoft was under pressure overnight after news that PC sales have plummeted in what is an increasingly tablet world. Of course PC sales are integral to sales of Windows and in particular Windows 8. My personal view is that my iPad now sits under my desk and I recently purchased a Toshiba Tablet/Laptop with Windows 8 and it is brilliant. Windows 8 is after all just windows with a different start screen – once you get your head around that then its easy and I can do all my normal spreadsheeting with ease and run my trading software. But others are yet to be convinced and Microsoft fell 4.8% overnight.
Given Microsoft is a Dow component the fact that the Dow still finished up 63 points of 0.42% shows just how strong the tailwind of central banks liquidity is at the moment. Equally though the big fall in jobless claims from 388000 last week to 346000 this week. Continuing claims were also a little lower dropping 12000. In the end the Nasdaq rose just 0.08% as the PC woes hit tech and the S&P 500 was 0.33% higher at 1593.
In Europe stocks did well after the Italian 3 year bond auction which went off at 2.29% versus 2.48% last time. At the close the FTSE is up 0.45%, the DAX rose 0.79% and CAC rose 0.86%. In Milan stocks rose 0.58% with Spanish stocks up 0.29%.
EuroYen continues to push higher making another 3 year+ high at 131.11 overnight as Euro pushed up a little against the USD making a high of 1.3138 and is up 0.27% on the day at 1.3103. As you can see in the weekly EURJPY chart above EuroYen is now approaching the 50% retracement level of the 2008-2012 sell off which might form a barrier for the moment but given the moves in USDJPY are the key drivers lately of Euro Yen and other Yen crosses the view on this and other Yen crosses really needs to be a view on USDJPY.
With Kuroda reiterating his commitment to liquidity and the debasement of the Yen just this week it is really going to be about market positioning and we look forward to seeing the CFTC data tomorrow morning to see just how long the Yen bears have gotten to see if there is any chance of a snap back. For the moment though any weakness in USDJPY continues to be bought back aggressively. Key short term level is 98.51.
The Aussie had a big day yesterday after the employment data saw a drop of 36100 as the previous months big gain saw some give back. The Aussie traded down to 1.0498 from around 1.0440ish prior to the figure but the weakness was reversed as the Euro rallied in early morning London trade. Aussie rallied up to a high of 1.0582 which is marginally higher than the 72 peak the night before but it has now slipped back to 1.0437 this morning.
As you can see in the chart above the Aussie has slipped down through the little 4 hour trendline from the beginning of April and it may be headed back to test support in the 1.0380 region into the close of the week – our fast moving average comes in at 1.0422 at the moment which is often support and a slip through here would be necessary to get AUDUSD back toward the 1.0380 region. The hourly charts suggest back to yesterday’s lows.
On commodity markets Crude fell 1.25% to $93.46 Bbl, Gold was up 0.39%, Silver rose 0.17% and the Ags all went in the same direction for a change with Wheat up 0.18%, Corn 0.39% higher and Soybeans rose 0.74%.
Let’s hope for some consistent translations when BoJ Governor Kuroda speaks today in Japan. Most of the data out in Europe tonight is inflation so not a concern with PPI out in the US but the market will be watching Retail sales very closely.