Stocks and the Aussie dollar under pressure, gold recovers

Quick Recap

It was a bad night for the stock markets bulls after the weaker than expected Chinese flash PMI data on Friday set the scene for more concerns about the state of the Chinese economy. Clearly no one believes the 7% figure printed recently for GDP in China and data like the PMI Friday support that notion.

That means traders are also questioning their assumptions for companies earnings in China and the overall demand for commodities that flow from the level of Chinese growth.

Regular readers know I have been looking askance at Chinese growth for a while now and I said on Sky Business a couple of months back I thought it was closer to printing in the 5% range than many realise.

Anyway traders worried when European PMI’s were weak as well so by the close of trade on Saturday morning every single stock market I watch closed in the read.

That sets up a tough open and a tough day’s trade for the local market with the ASX futures indicating a 59 point drop today. We’ll see of course but the market looks pressures.

Also pressured are the Aussie dollar, still under 73 cents this morning, and gold, which recovered $20 off Friday’s lows once all stocks started falling. The Aussie is suffereing from a reappraisal of China and the economic/commodity outlook while gold is simply suffering from a lack of relevance.

But Westpac’s head strategist Rob Rennie reckons even though the chances of a dip below 70 cents are real it probably won’t happen. That’s even more likely if his colleague Bill Evans, Westpac’s chief economist, view that the RBA Governor downgrading – or at least discussing the downgrading – of Australia’s potential growth rate means less chance of a rate cut.

One other thing worth noting is that my Business Insider colleague Myles Udland reported over the weekend that hedge funds have never hated gold so much. CFTC data released on Friday showed that the subset of hedge traders is “holding net shorts for the first time since the data started being recorded in 2006 (-11,345 contracts),” The NAB’s Ray Attril wrote this morning.

• Dow Jones down 0.92% to 17,568
• Nasdaq down 1.12% to 5,088
• S&P 500 down 1.07% to 2,079
• London (FTSE 100) down 1.13% to 6,579
• Frankfurt (DAX) down 1.43% to 11,347
• Tokyo (Nikkei) down 0.67% to 20,544
• Shanghai (composite) down 1.29% to 4,070
• Hong Kong (Hang Seng) down 1.06% to 25,128
• ASX Futures overnight (SPI September) -49 to 5,467
• AUDUSD: 0.7273
• EURUSD: 1.0977
• USDJPY: 123.81
• GBPUSD: 1.5514
• USDCAD: 1.3043
• Crude: $48.10
• Gold: $1,096
• Dalian Iron Ore (September): 389

On the day

On the data front today, there is nothing out in Australia. Tonight we get the German Ifo business index and the big one for the 24 hours to come is US durable goods orders.

CHART OF THE DAY: SPX Weekly

This chart is from my Weekly diary of all the key data and events for the next 7 days I write at Business Insider.

This is the simplest indicator I use for long term trends and its still bullish but it looks like its topping. Long term though and key here is its STILL bullilsh.