You can’t make markets move if they don’t want to and while there were massive ructions in stocks and bonds overnight currency traders in the big pairs really did very little.
Certainly the Euro reversed a little of its recent pickup but it is still in this undetermined period where it is either basing or resting before the next big fall. Readers of this column know that I am in the latter camp on a longer term fundamental basis but recognise the Euro is washing off a small oversold period on the daily charts.
On the dailies the parameters are still the 1.3320ish to 1.3430ish range but as you can see in the weeklies above the Euro has now spent a number of weeks below the 200 week moving average – it’s just a matter of time.
Looking at stocks and bonds it was a fairly positive night for the former and a negative night for the latter with an easing of geopolitical tensions as Ukraine talks continue and as ISIS had it grip on the Dam in Iraq shaken loose.
At the close the Dow was up 175 points or 1.06% to 16,838. The S&P 500 rose almost 17 points or 0.85% to 1,972 and the Nasdaq traded to its highest level since 2000 at 4,508 up 0.97%.
If bad news was good news last week then it would be disingenuous to say today that stocks rose because of the strength of the NAHB home builder confidence system which leapt to 55 – a seven month high. Rather if you look dispassionately at the moves in stocks and bonds it really feels like it has more to do with ISIS and Ukraine than any actual market or economic induced factors. Equally though the big sell off in bonds – see below – suggests that some traders thing they have come too far too fast, at least for today.
In Europe the catch up from Friday’s move happened early and stocks keep moving higher. The DAX ripped 1.68% higher to 9,245, the CAC was 1.36% higher to 4,231 while the FTSE was positive but lagged up 0.78% to 6,741. Stocks in Milan and Madrid were 0.82% and 1.28% higher respectively.
It all adds up to a positive day ahead for the ASX with overnight futures trade showing that the September SPI 200 futures were up 25 points to 5,554. There is also a raft of important company reports today including Arrium, BHP Billiton, IAG, QBE and Toll.
SPI 200 back toward range highs
There is no avoiding this move in bonds overnight and the potential ructions that it might cause or signal under the waters of the pond that is global markets. Clearly last night there was some sort of shift in global bonds with sellers across the board.
US 10 year treasuries rose 6 points to a still low 2.39%, German Bunds were absolutely poll axed losing 6.66% of their capital value with a sell off of 6 points to 1.02% – ugly! UK 10 year gilts lost 10 points to 2.43%. Italian bonds sold off 2 points and Spanish bonds were 8 points higher. Now clearly these rates are all super low but at these levels the capital volatility of a 1 point move is huge.
- In Asia yesterday it was fairly quiet so we’ll get plenty of catch up today. Shanghai was up 0.55%. We are waiting on Japanese trade data today which will give a further window into the enduring efficacy, or not as may be the case, of Abenomics.
On currency markets the Euro is down a little at 1.3363, USDJPY is back at 102.57 and Sterling is sitting at 1.6726. The Aussie has hardly moved and this morning remains fairly steady at 0.9318.
On commodity markets iron ore’s reversal of its reversal off the lows seems in train with the break of an important technical level overnight and a fall of $1.30 a tonne to $92.33. September Newcastle coal was also down but a more modest 35 cents a tonne to $70.30.
Nymex crude fell 79 cents to $96.56 a Barrel while gold lost another $6 to $1,298 an ounce while silver closed at 19.58. Copper rose 1 cent a pound to $3.11 while the Ags saw an amazing one day fall of 7.49% for soybeans and a 7% fall in oats. Corn rose 1.37% and wheat was much more quiet at 0.47% higher.
On the data front it is another quiet one locally with only the release of the RBA minutes to trouble the scorer. Of course its a heavy day of company reporting as noted above. Offshore UK and US CPI are the key out turns on the data front and will inform expectations about the path of interest rates for both the BoE and FOMC.
Greg McKenna
NB: Please note all references to rates above are approximate
To learn more about Greg McKenna, read on here.
Certainly the Euro reversed a little of its recent pickup but it is still in this undetermined period where it is either basing or resting before the next big fall. Readers of this column know that I am in the latter camp on a longer term fundamental basis but recognise the Euro is washing off a small oversold period on the daily charts.
On the dailies the parameters are still the 1.3320ish to 1.3430ish range but as you can see in the weeklies above the Euro has now spent a number of weeks below the 200 week moving average – it’s just a matter of time.
Looking at stocks and bonds it was a fairly positive night for the former and a negative night for the latter with an easing of geopolitical tensions as Ukraine talks continue and as ISIS had it grip on the Dam in Iraq shaken loose.
At the close the Dow was up 175 points or 1.06% to 16,838. The S&P 500 rose almost 17 points or 0.85% to 1,972 and the Nasdaq traded to its highest level since 2000 at 4,508 up 0.97%.
If bad news was good news last week then it would be disingenuous to say today that stocks rose because of the strength of the NAHB home builder confidence system which leapt to 55 – a seven month high. Rather if you look dispassionately at the moves in stocks and bonds it really feels like it has more to do with ISIS and Ukraine than any actual market or economic induced factors. Equally though the big sell off in bonds – see below – suggests that some traders thing they have come too far too fast, at least for today.
In Europe the catch up from Friday’s move happened early and stocks keep moving higher. The DAX ripped 1.68% higher to 9,245, the CAC was 1.36% higher to 4,231 while the FTSE was positive but lagged up 0.78% to 6,741. Stocks in Milan and Madrid were 0.82% and 1.28% higher respectively.
It all adds up to a positive day ahead for the ASX with overnight futures trade showing that the September SPI 200 futures were up 25 points to 5,554. There is also a raft of important company reports today including Arrium, BHP Billiton, IAG, QBE and Toll.
SPI 200 back toward range highs
There is no avoiding this move in bonds overnight and the potential ructions that it might cause or signal under the waters of the pond that is global markets. Clearly last night there was some sort of shift in global bonds with sellers across the board.
US 10 year treasuries rose 6 points to a still low 2.39%, German Bunds were absolutely poll axed losing 6.66% of their capital value with a sell off of 6 points to 1.02% – ugly! UK 10 year gilts lost 10 points to 2.43%. Italian bonds sold off 2 points and Spanish bonds were 8 points higher. Now clearly these rates are all super low but at these levels the capital volatility of a 1 point move is huge.
- In Asia yesterday it was fairly quiet so we’ll get plenty of catch up today. Shanghai was up 0.55%. We are waiting on Japanese trade data today which will give a further window into the enduring efficacy, or not as may be the case, of Abenomics.
On currency markets the Euro is down a little at 1.3363, USDJPY is back at 102.57 and Sterling is sitting at 1.6726. The Aussie has hardly moved and this morning remains fairly steady at 0.9318.
On commodity markets iron ore’s reversal of its reversal off the lows seems in train with the break of an important technical level overnight and a fall of $1.30 a tonne to $92.33. September Newcastle coal was also down but a more modest 35 cents a tonne to $70.30.
Nymex crude fell 79 cents to $96.56 a Barrel while gold lost another $6 to $1,298 an ounce while silver closed at 19.58. Copper rose 1 cent a pound to $3.11 while the Ags saw an amazing one day fall of 7.49% for soybeans and a 7% fall in oats. Corn rose 1.37% and wheat was much more quiet at 0.47% higher.
On the data front it is another quiet one locally with only the release of the RBA minutes to trouble the scorer. Of course its a heavy day of company reporting as noted above. Offshore UK and US CPI are the key out turns on the data front and will inform expectations about the path of interest rates for both the BoE and FOMC.
Greg McKenna
NB: Please note all references to rates above are approximate
To learn more about Greg McKenna, read on here.
In addition to the website disclaimer below, the material on this page prepared by Vantage FX Pty Ltd does not contain a record of our prices or solicitation to trade. All opinions, news, research, tools, prices or other information is provided as general market commentary and marketing communication – not as investment advice. Consequently, any person acting on it does so entirely at their own risk. The expert writers express their personal opinions and will not assume any responsibility whatsoever for the forex trading account of the reader. We always aim for maximum accuracy and timeliness, and Vantage FX shall not be liable for any loss or damage, consequential or otherwise, which may arise from the use or reliance on this service and its content, inaccurate information or typos. No representation is being made that any results discussed within the report will be achieved, and past performance is not indicative of future performance.sary.
Recommended Content
Editors’ Picks
EUR/USD clings to gains above 1.0750 after US data
EUR/USD manages to hold in positive territory above 1.0750 despite retreating from the fresh multi-week high it set above 1.0800 earlier in the day. The US Dollar struggles to find demand following the weaker-than-expected NFP data.
GBP/USD declines below 1.2550 following NFP-inspired upsurge
GBP/USD struggles to preserve its bullish momentum and trades below 1.2550 in the American session. Earlier in the day, the disappointing April jobs report from the US triggered a USD selloff and allowed the pair to reach multi-week highs above 1.2600.
Gold struggles to hold above $2,300 despite falling US yields
Gold stays on the back foot below $2,300 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays in negative territory below 4.6% after weak US data but the improving risk mood doesn't allow XAU/USD to gain traction.
Bitcoin Weekly Forecast: Should you buy BTC here? Premium
Bitcoin (BTC) price shows signs of a potential reversal but lacks confirmation, which has divided the investor community into two – those who are buying the dips and those who are expecting a further correction.
Week ahead – BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.