Stocks down, Aussie pressured, commodities sinking

Quick Recap

It was a sea of red across US and most European bourses with only the CAC in Paris and the AEX in Athens able to cling to a marginal gain for the day. Bonds also rallied, rates lower, the US dollar was under a little pressure and crude and gold both fell as well. The Aussie dollar remains friendless and under pressure but iron ore managed to rally.

The pressure on the Aussie is not exactly acute, it has literally collapsed over the past year against the US dollar regardless of what the RBA might say, but it’s clear in the price action that any bulls are not exactly rushing to buy at these levels. That’s because, to quote Westpac’s currency strategy team, there is a ‘commodity clearance sale’ under way.

Last night Dr Copper dropped down to $2.37 – that’s the lowest level since 2009. The Aussie is also at its lowest level since 2009 so its not fresh news. But it is emblematic of the overall malaise that is now gripping industrial metals and energy. Summarising the overnight move in commodities my colleague from BI US Akin Oyedel wrote this morning that:

Copper fell to a six-year low, and Goldman Sachs analysts forecast continued weakness as Chinese demand falters. Iron-ore prices recently tanked, and gold is far from rebounding after Sunday’s flash crash.

Part of that is reflected in teh Caterpillar results I highlihgted yesterday in my Asian wrap.  here’s what Akin wrote this morning.

According to Caterpillar, “the global economy remains relatively stagnant.” In its second-quarter earnings results released this morning, the manufacturer of construction and manufacturing equipment noted that other than a “modestly positive” outlook for the US, many parts of the world including China, the Eurozone, and Brazil are not holding up well. The company is considered a bellwether of economic activity because of the enormous projects their products are used in.

The commodity block is still pressured – notwithstanding the rally in Kiw yesterday. That was a technical one.

As noted above stocks were lower in most of Europe and the US and that leaves the ASX 200 under pressure with futures indicating further selling today. On teh charts the index is resting back on important support.

In teh rest opf the forex block Kiwi held onto most of its gains from yesterday while Sterling came under pressure after retail sales for jun printed -0.2% ex fule and energy against expectations of a 0.3% rise. That questions timing for a BoE rate hike. Euro rallied above 1.10 but couldn’t hold its gains.

Now The overnight scoreboard (7.40am AEST):

• Dow Jones down 0.67% to 17,731
• Nasdaq down 0.49% to 5,146
• S&P 500 down 0.57% to 2,102
• London (FTSE 100) down 0.18% to 6,655
• Frankfurt (DAX) down 0.07% to 11,512
• Tokyo (Nikkei) up 0.44% to 20,683
• Shanghai (composite)up 2.44% to 4,124
• Hong Kong (Hang Seng) up 0.46% to 25,398
• ASX Futures overnight (SPI September) -19 to 5,513
• AUDUSD: 0.7349
• EURUSD: 1.0985
• USDJPY: 123.91
• GBPUSD: 1.5505
• USDCAD: 1.3037
• Crude: $48.85
• Gold: $1,090
• Dalian Iron Ore (September): 381

On the day

Datawise today its market flash PMI day today for China and across much of the planet. Other than that it’s only new home sales in the US to worry about.

CHART OF THE DAY: AUDJPY

It’s struggling to get back up above this trendline which stretches back to 2008.

Equally the 89 region, which has been support since 2013, has held firm.

My bias is for a downside test while below 93.45 – i know this is a huge way away but this is a small posi slow burn type of trade. target is 84/85 in time.

NZDUSD: We squared up yesterday as discussed.