Quick Recap
Stocks rallied nicely in the US and marginally in Europe. That’s not too bad all things considered given how poor sentiment was just 24 hours before.
It’s not unusual though as I highlighted yesterday – we are in the volatility aftershock period after the market earthquake last week.
Of course the reversal in Shanghai’s terrible performance yesterday from down around 4% to down not terribly much was a key part of the improvement in global markets. Likewise I think the fact that it’s now closed for 4 days while China celebrates the end of WWII is also helpful.
That’s helped the ASX futures point to a better day’s trade and also helped the US dollar get some of its mojo back against the Euro and Yen.
But, it’s worth talking about the volatility in sentiment at the moment. I’d argue the turnaround in sentiment in Australian stocks, and the globe over the past 24 hours, has been interesting. It is entirely consistent with the wildly emotional moods that traders are going through at the moment and while it is hard to fathom, it is similar to the types of moves we have seen in many markets over the years. Perhaps the best way to describe it is to say that last week’s move was an earthquake and what markets are going through at the moment are the aftershocks. So as highlighted yesterday, as long as the markets hold above the recent lows, there is little fear of a re-acceleration of the acute bearishness that we experienced last week. Rather, this is simply base building.
Unless of course the recent lows give way…then it could get ugly.
The overnight scoreboard (7.14am AEST):
- Dow Jones -2.84% to 16,058
- Nasdaq -2.94% to 4,636
- S&P 500 -2.95% to 1,914
- London (FTSE 100) down 3.02% to 6,059
- Frankfurt (DAX) -2.37% to 10,016
- Tokyo (Nikkei) -3.84% to 18,165
- Shanghai (composite) -1.28% to 3,165
- Hong Kong (Hang Seng)-2.24% to 21,185
- ASX Futures overnight (SPI September) -68 to 4,990
- AUDUSD: 0.7043
- EURUSD: 1.1213
- USDJPY: 120.57
- GBPUSD: 1.5304
- USDCAD: 1.3243
- Nymex Crude (front contract): $44.23
- Copper (US front contract): $2.2930
- Gold: $1,139
- Dalian Iron Ore (September): 465 (denominated in CNY)
- US 10 year bond rate: 2.20%
- Australian 10 year bond rate: 2.64%
On the day – retail sales
On the data front today, we get retail trade at 11.30am to focus traders’ minds on whether the weak data yesterday is as historic as many hope. Before that, we get the AiGroup performance of services index and we also get trade data out at 11.30am. Tonight, we also get services PMIs in Europe along with EU retail sales and an ECB interest rate decision and statement. In the US, we get services PMI, non farms, trade and the Challenger jobs report.
CHART OF THE DAY: The Aussie dollar found support
Much bearishness was already baked in the cake for the Aussie dollar yesterday before the GDP release, and after the recessionary GDP in Canada, the fact that the Aussie bounced back from the foray below 70 cents so easily also suggested that the bears are just as nervous as the bulls at the moment.
Could this be a short term base…the case is building.
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