Around the Grounds: Stocks retrace from highs , Euro slipping

Quick Recap

I’m being a bit facetious with the picture today because even though it was a sea of red in the past 20 hours since Shanghai opened the bears have hardly stirred.

As I noted at Business Insider this morning,

a pullback from new alltime highs, in the case of the Dow and S&P, 15 year highs in the Nasdaq and near-recent highs in many other markets is neither unexpected nor a disaster. But the apparent cause of the Shanghai sell-off is interesting in what it says about perceptions of the market. Reports from Shanghai are that with the raft of IPOs approved by the CSRC on Monday, which number 24 in all and 12 for Shanghai, weighed on sentiment as traders fretted that rather than attract fresh capital the new issues would simply drag money from current listed stocks. That’s a reasonable assumption at these valuations. No doubt the proximity of the NPC downgrading its growth forecast, likely anyway, for the Chinese economy this week is also top of mind.

What is interesting about that is traders globally may be uncommonly concerned about the official economic target we get for China because it will inform the amount and level of stimulus to expect from the PBOC.

Morgan Stanley believes that China will continue with its targeted, rather than blanket, approach. this means lower and slower growth while the economy rebalances. It also means they say, the Aussie will fall to 65 cents next year.

Other things worth noting are that German retail sales were through the roof printing an amazing 2.9% in January against 0.4% expected. That takes the year on year rate of retail sales growth to 5.3%. As I noted at BI “Jens Weidmann, the Bundesbank president, gave a speech in January where he talked about a boom in Germany – I didn’t get it at the time. I do now.” 

Interestingly it hasn’t helped the Euro which is still looking weak and dragging the Pound with it. Although as we have been saying in the Asian Wrap GBP is testing to see if support will hold up or not. 

On the day

Q4 GDP is released today in Australia and while it is backward looking it will still be important in framing expectations about what the RBA will do next after holding fire yesterday but adopting a clear easing bias. There is a raft of services PMIs released by HSBC and Markit today across the globe and tonight we see both a Bank of Canada Board meeting and the US ISM manufacturing PMI.

And here’s the overnight Scoreboard (8.45 am AEDT):

• Dow Jones down 0.47%, 86 points to 18,203
• Nasdaq down 0.56% to 4,980
• S&P down 0.44%, 9 points to 2,108
• London(FTSE 100) down 0.74%, 52 points to 6,889
• Frankfurt (DAX) down 1.14%, 130 points to 11,280
• Paris (CAC)down 0.98%, 48 points to 4,869
• Tokyo(Nikkei) down 0.06% to 18,815
• Shanghai (Composite) down 2.2%, 73 points to 3,263
• Hong Kong (Hang Seng) down 0.74%, 184 points to 24,703
• ASX Futures (SPI June) down 12 points at 5,907
• AUDUSD: 0.7818
• EURUSD: 1.1176
• Crude: $50.36
• Gold: $1,203.20

CHART OF THE DAY:

EURUSD – Darvas box but watch out: 

We got a time not price consolidation from the Euro with greece derailing what was looking like a solid potential rally. .

With EUR back near the January lows (but not yet broken) it is worth contemplting what will happen when , yes when, that level breaks.

If I use a simply Fibo projection I get a move to the low 105 region. But as ever I never preempt a break such as this preferring to trade the range until then.