Stocks and bonds higher, US dollar a little stronger

Quick Recap

European stocks, back from their May Day holiday, played catch up to the US move from Friday last night with some solid gains – especially in Germany. Data was mixed with some terrible and not so terrible prints for global manufacturing PMI’s. Of note was the really weak print for China. Of course that helped stocks in Shanghai yesterday but in Australia the banks, especially Westpac, weighed on the sector and kept the market from being as strong as many thought.

last nights futures performance looks like it will remedy that though. At least until the RBA announcement. While everyone thinks that they will cut the chances are that they leave things as they are for another month as they assess where th economy really is as we head toward the second half of the year. The market always wants action but the RBA plays a long game – what’s another month?

Anyway we’ll know at 2.30 and myself and my Business Insider colleagues will have full coverage – pop on over.

Elsewhere it’s clear that something is up in the bond market as I highlighted in my Asian Trading wrap last night. LAst night we heard from Warren Buffett who said  “bonds are very overvalued” and once rates start to rise in the US, “stocks won’t look cheap.”

There was move evidence I picked up on this theme in writing my morning note at Business Insider this morning where I highlighted that:

Two indicators support the risks highlighted by Buffett and view expressed by Jim Paulsen that the current state of the US economy is incompatible with zero interest rates. The first is that Deutsche Bank economist Torsten Slok saysAmericans are running out of places to rent– that means a tightening in supply, extra demand and upward price pressure. The second thing I stumbled across on this morning trawl of the overnight news is Gluskin Sheff’s well regarded economist David Rosenberg saying that “Misery” in America is at a 56-year low. Like Australia, consumer confidence in the US doesn’t appear as strong as it could be but Rosenberg believes that consumers are likely “to play a lead role in a rebound over the remainder of this year”.

On the day

On the data front today, the RBA at 2.30pm dominates but we also have the Ai Group performance of services, ANZ weekly consumer confidence, HIA new home sales and ABS trade data this morning. Asia is quiet, Europe sees the release of PPI data for the EU and then in the US it’s trade and services PMI.

Here’s the overnight scoreboard(8.33am AEST):

• Dow Jones up 0.26% to 18,070
• Nasdaq up 0.23% to 5,016
• S&P 500 up 0.29% to 2,114
• London (FTSE 100) up 0.36% to 6,985
• Frankfurt (DAX) up 1.44% to 11,619
• Paris (CAC) up 0.7% to 5,081
• Tokyo (Nikkei) up 0.06% to 19,531
• Shanghai (composite) up 0.9% to 4,481
• Hong Kong (Hang Seng) down 0.03% to 28,123
• ASX Futures (SPI June) +29 to 5,835
• AUDUSD: 0.7835
• EURUSD: 1.1144
• USDJPY: 120.13
• GBPUSD: 1.5115
• USDCAD: 1.2091
• Crude: $58.89
• Gold: $1,188

CHART OF THE DAY:

AUDUSD: While above 0.7775/85 the Aussie’s topside bias remains.

The weeklies are looking very bullish so i’m not getting negative at all.

Yesterday I said that on the 4hr EURUSD I was looking for a continued pullback from high. We saw that overnight and 1.11 and then 1.1050 are the strong support levels. 

ASX200: I said Friday trade the range – that’s the way to play it. Unitl it breaks.