Stocks, commodities, Kiwi and Aussie dollars bounce

Quick Recap

It was a much better night for stocks as Wall Street and European traders  shrugged off the Chinese market volatility overnight. That’s left all the markets I follow with solid gains and ended five straight days of declines in the US.

Energy stocks were a key driver in the US but all sectors in the S&P 500 advanced into the close. Earnings results from companies including UPS, Pfizer, and Ford topped forecasts which also contributed to the improved tone. Across the Atlantic in Europe, it was the Pharma sector again leading the charge. That’s helped local futures which are indicating at 26-point rally on the ASX today to follow on from what has been a pretty impressive performance so far this week.

Elsewhere bonds came under a little pressure as stocks rallied and the Kiwi was the standout mover in currency land, up more than 1%. It’s up again after RBNZ Governor Wheeler has hosed off expectations for a big cycle of rate cuts.

Here’s Wheeler.

“We will review our growth forecasts in the September Monetary Policy Statement but, at this point, we believe that several factors are supporting economic growth. These include the easing in monetary conditions, continued high levels of migration and labour force participation, ongoing growth in construction, and continued strength in the services sector.”

The Aussie and Canadian dollars were also higher and the CRB rallied 0.8% in what looks like an interesting commodity and commodity bloc move amid weak sentiment toward the sector. Iron ore had a great night. Dalian exchange, was up 2.3%!

Turning to the Chinese gyrations yesterday and it’s worth repeating what I wrote at Business Insider this morning .

China was the big story in our time zone yesterday. David Scutt wrote:

“Having opened down more than 5%, the index staged a remarkable mid-session rally, briefly breaking into positive territory before meandering lower over the course of afternoon trade. Eventually the index closed down 1.68%.”

That’s a victory of sorts for authorities who are just trying to stem the bleeding and stabilise the market in what seems like a battle that will drive stocks lower in time. That’s the view of Deutsche Bank which believes Shanghai looks like the Nasdaq bubble. But yesterday, as the Shanghai rally celebrated on its first birthday, the 200-day moving average proved support once again. Here’s the chart:

The focus today will turn to the FOMC and what they might say. It is too early for the move yet but Janet Yellen and her colleagues are likely to signal the move is coming.

The overnight scoreboard (8.41am AEST):

• Dow Jones +1.09% to 17,630
• Nasdaqup +0.98% to 5,089
• S&P 500 +1.24% to 2,093
• London (FTSE 100) +0.77% to 6,555
• Frankfurt (DAX) +1.06% to 11,173
• Tokyo (Nikkei) -0.1% to 20,328
• Shanghai (composite) -1.68% to 3,662
• Hong Kong (Hang Seng) +0.62% to 24,503
• ASX Futures overnight (SPI September) +29 to 5,569
• AUDUSD: 0.7341
• EURUSD: 1.1062
• USDJPY: 123.56
• GBPUSD: 1.5610
• USDCAD: 1.2925
• Crude: $47.71
• Gold: $1,095
• Dalian Iron Ore (September): 400

On the day

On the data front, there is nothing in Australia but forex traders will be watching RBNZ governor Wheeler’s speech closely today. Retail trade in Japan is out as is the Gfk consumer sentiment survey in Germany tonight. Home sales and crude inventories are out in the US and then at 4am it’s the FOMC decision.

CHART OF THE DAY: NZD break out

The high has not broken my slow moving average which is the latest resistance but Kiwi is building to a big move higher it seems.

Yesterday we looked at EURO – and said “higher within the box but breaking short term down trend.” HAsn’t gone on with it FOMC important tonight.