Data in Germany and the US was positive for markets overnight giving European markets a stronger close but the US markets have pulled back off their highs from around 11am their time with the Nasdaq under heavy pressure from Apple.
Apple shares were got absolutely smashed overnight down 12% at one stage and there is little doubt now that the combination of technicals and fundamentals are pointing the stock lower still. The weaker than expected earnings was the catalyst for the sell off but the technical picture for Apple has looked weak for some time. The last nights move has now finally broken the uptrend from 2008.
In a purely technical sense the $350/360 region looks like it is the key level that Apple might head toward. Now of course if the rest of the market is heading higher as it is presently this might temper Apple's fall but the break of a multi-year trend line is no small event - we'll see where it closes in Friday trade for confirmation.
Looking at the PMI data that was released there is much to feel positive about in an economic sense. The HSBC Manufacturing PMI for China was higher as was Germany, the EU and the United States. The key for us is the fact that China and the US are above the 50 expansion mark and with the exception of France are all headed in a more positive direction.
Jobless claims in the US were also positive and while a small 5,000 fall in a nation the size of the united States is small bikkies the reality is that after the big fall last week many thought that there would be a reversal - so once again its not necessarily the data print but what expectations of the data print are that drive markets. The market expected 355,000 yet the print was 330,000. This is positive for the US equity market as is the 4 week moving average which is falling also. For the record Jobless claims are the lowest they have been in 5 years.
The East coast of the United States is 5 hours behind Britain and 6 hours behind the Western part of the European continent. So the highs at 11am in New York either at or after the close for Europe's bourses and so at the close European markets were close to their highs. The FTSE was up 1.09% or 67 points at 6265, the DAX was more subdued up just 0.52% and the CAC was 0.69% higher. Stocks in Milan rose 1.01% and in Madrid they were 0.61% higher.
In the US the early strength has given way to less ebullient trade as the troubles with Apple wash through the market and the Nasdaq is down 0.56% with 20 minutes to trade. The S&P 500 is up 0.15% and the Dow is up 0.49%.
In Asia yesterday the Nikkei was up 1.28% as the Yen reversed its recent strength after comments from a Japanese minister hinted at 100 as the target for the Abe Administration. The rest of Asia was more mixed but the ASX was up 0.45%.
A big night of ranges for Global FX markets overnight with the Euro trading 1.3285 up to 1.3392 and rests currently at 1.3370 for a gain of 0.40%. Sterling had a big figure range as well 1.5850 down to 1.5753 and sits at 1.5789 for a fall of 0.35%. But it was the Yen which was the big mover trading 88.40 up to 90.14 and its rests at 89.98 presently for a loss of 1.56% against the USD - that is a huge move for FX markets. USDCAD reversed some of yesterday's weakness and the Aussie Dollar came under pressure with it too trading a range of more than 1 big fugure with a high of 1.0555 giving way to a low of 1.0448 and it sits presently at 1.0463 for a loss of 0.86%
It's not usual for markets to be a bit risk on and the Aussie to break the bottom of its trading box and head lower but this price action does support the view that a rotation away from the Aussie and Aussie dollar denominated assets is occurring. Our hypothesis for the Aussie has been that it is a safe harbour in a storm not a safe haven. The price action overnight in the face of a better economic performance from the PMI's of China, Germany and the US is a case in point. Money seems to be rotating out of the Aussie and into markets that are once again offering the chance for profit.
We'll see - it could just be that the US dollar is stronger because its economy is healing - but then again that's the point of a safe harbour isn't it - port in a storm awaiting sunshine. The economic sun seems to be shining a little brighter than at any time in the past couple of years in the US. At least for the moment.
Looking technically at the 4 hour charts we see the AUD broke an old trendline and then the bottom of the box to head to an overnight low of 1.0448 before rallying a little in the last few hours. The daily charts suggest further losses and the Aussie would need to break back above 1.0480/85 to turn the short term outlook more positive once again.
The huge range and reversal in USDJPY was fuelled by the comments of Junior Economi Minister Yasutoshi Nishimura who said,
The current level around ¥90 can be said to be a correction in the strong yen, but it isn’t over yet
This comment coupled with with the large amount of buyers still unsatisfied in the market and the fact, well we think it is a fact, that the fall in USDJPY crossed our fast moving average but couldn't get through the middle of the Bolly bands meant that the bulls were still in control - even though we desperately wanted a pullback to cleanse the market.
As you can see in the chart above the USDJPY has once again hit the high of the run and while it is still overcooked it's a bull market so be bullish.
Euro is still trading within the box we have identified and it needs to break either 1.3404 or 1.3250ish to get us overly excited. But that's a big enough range to trade shorter term as you can also see in the chart.
Gold was down $16.80 an oz. or 1% to $1668 and Silver was off 2.20% to $31.75 oz. Crude on the other hand managed to rally another 0.81% even thought the EIA data showed an increase of 2.813 million barrels in storage after last week's unexpected draw. The Ags were mixed with corn up 0.38%, wheat fell 0.81% and soybeans fell 0.10%. Copper was off 0.18%.
China has its MNI Business sentiment index out today then the focus turns to Europe where the German IFO and UK GDP will give traders plenty to get excited about.
Please note that even though the 26th of January is Australia Day the Public holiday is next Monday in Australia so there will be no Morning Report - have a great weekend and Happy Australia Day, Happy Birthday to my son Hamish and Happy Republic Day to our Indian Friends.
Catch me on Twitter @gregorymckenna or @FX_Global