No follow through in the US to the Asia-Pac weakness

Quick Recap

The storm clouds that hung over Asia-Pac trade yesterday dissipated somewhat in Europe, which finished in the red but took back half it’s losses, and the US where the Dow and S&P finished in the black. But, it’s not all good news with the Nasdaq still lower on the day and markets still on tenterhooks.

Glencore recovered about a third of the previous night’s loss with a 16% rally last night as the company defended its position, bargain hunters entered the fray and the analyst, whose report set off the selling Monday night, seemed to step back a little from his claim that Glencore’s equity value would be wiped out.

All of this helped BHP and Rio rally in London trade last night and propelled the ASX SPI 200 futures for December up 43 points. That still leaves prices depressed. But, its the last day of the quarter today so thre is more chance than not that stocks will stage a nice little rally into the close. My guess is that we’ll see the ASX up 1% or more at day’s end.

The rally in commodities will also help today with Crude up around 1%, copper lifted 1 cent a pound, base metals more broadly rallied in London and the CRB commodity index was also higher.

On forex markets I’ll quote myself from Business Insider this morning:

On currency markets, if you look at the prices this morning compared with those yesterday around this time you’d be forgiven for thinking nothing happened. But the Aussie nudged below last week’s low in afternoon trade yesterday hitting 0.6934. At the same time the Kiwi was testing 63 cents and USDJPY was in the low 119’s. But the fact that stocks didn’t follow Asia-Pacific’s lead reversed these moves, so in the end only the Canadian dollar was materially away from where it was 24 hours ago.

Editorial

I’m just not going to get uber-bearish. As I keep saying that’s not to say that is not my rhetorical bent. Indeed, my super is 100% cash waiting for substantially lower prices before I get back into a more risk seeking asset allocation.

The reason is that the types of pessimistic crescendo’s we saw yesterday are part and parcel of this increased volatility we are seeing in markets at the moment. markets are surely becoming unstable and they are setting up a huge probability of a big crash or protracted fall in prices. But everyone else seems uber-bearish now. That often reflects their position as much as anything else and as Euro bears saw at 1.05 the chances of a rebound grow when that’s the position.

All bets are off if/when the August lows give way.

The overnight scoreboard (8.26am AEST):

• Dow Jones Industrials +0.3% to 16,049
• Nasdaq Composite -0.59% to 4,517
• S&P 500 +0.12% to 1,884
• London (FTSE 100) -0.83% to 5,909
• Frankfurt (DAX) -0.35% to 9,450
• Tokyo (Nikkei) -4.06% to 16,980
• Shanghai (composite) -2.06% to 3,036
• Hong Kong (Hang Seng)-2.97% to 20,556
• ASX Futures overnight (SPI December) +43 to 4,925
• AUDUSD: 0.6991
• EURUSD: 1.1254
• USDJPY: 119.78
• GBPUSD: 1.5152
• USDCAD: 1.3421
• Nymex Crude (front contract): $44.91
• Copper (US front contract): $2.26
• Gold: $1,127
• Dalian Iron Ore (January): 367(denominated in CNY)
• US 10 year bond rate: 2.06%
• Australian 10 year bond rate: 2..61%

On the day – Can Australian consumer confidence hold is ‘Turnbull bounce’?

Today’s data calendar is dominated by Japanese retail sales, housing starts and industrial production. In Australia we get the release of private sector credit and building approvals. Retail sales and unemployment are out in Germany tonight along with the latest read in UK GDP. EU employment is out while in the US tonight we get the Chicago PMI, ADP payrolls, a speech by Bill Dudley and another by Janet Yellen.

CHART OF THE DAY: AUDNZD

There are plenty of tantalising setups in markets at the moment but often it’s good to take the US dollar out of the equation at times of fractious trade the likes of which we are seeing in markets at the moment.

That’s because in trading a ‘pair’ or cross like the AUDNZD you can at least hone in on fundamental drivers between the two nations and leave out things like market sentiment and the US dollar’s moves.

That’s one of the reasons the AUDNZD is trading in a big old box. It’s a nice trading range…