Axi | Apr 18, 2018 09:42
Originally published by AxiTrader h2 Market Summary (7.42am Wednesday April 18)/h2
Resistance eliminated! Earnings look good.
That’s the short story of stocks overnight with solid gains on US and European markets defying the continued unease on Chinese bourses yesterday.
At the close the S&P 500 is up another 28 points, 1.06% to 2,706 besting the top of the very recent range and rising back to the 61.8% retracement level of the fall from just above 2,800 to the recent low around 2,550. The Dow is up more than 200 points, 0.87%, to close at 24,786 while the Nasdaq surged 2.12% helped by Netflix's (NASDAQ:NFLX) almost 10% gain.
In Europe it was a game of catch up after the previous days trade missed the strength of the US rally. The DAX was up 1.57%, the CAC up 0.76%, and the FTSE in London rose 0.39% while Milan’s FTSE MIB was 1.37% higher. Yesterday in China we saw more weakness with the Shanghai Composite down 1.3% despite the reasonably solid 6.8% GDP print and relatively robust retail sales, investment, and production data.
Overnight the PBOC cut the reserve requirements on a number of banks by 1% - maybe that will help.
Here at home after a lacklustre day yesterday for the local exchange SPI traders are betting that the S&P/ASX 200 has a better day of it, adding 24 points overnight. That seems reasonable. Watch for a break of yesterday’s higher at 5,871 on the ASX200 or 5,855 on the SPI to really get things moving. It those levels don’t break it’s a signal too.
On forex markets you’d be forgiven for thinking the return of risk appetite would have helped the Aussie dollar. But alas that is not the case and AUD/USD is down marginally at 0.7769 – it’s showing an uncommon lack of volatility at the moment.
Elsewhere the pound reversed sharply off new post-Brexit highs up around1.4375, or thereabouts, despite decent prints for jobs (+55k v 33k exp, UE4.2% v 4.3% exp) and wages. It’s at 1.4290, actually down 0.3% on the day and back inside the previous and persistent range. Euro is largely unchanged at 1.2372 despite a fall in the ZEW economic conditions (87.9 from 90 last) and sentiment (-8.2 from 5.1 last) indexes and the bounce in US industrial production (+0.5% v 0.4% exp). USD/JPY is also largely unchanged at 107.02, as is the USD/CAD at 1.2546 while the kiwi is down 0.3% at 0.7340.
On commodity markets oil is back up a little with WTI gaining 0.4% to $66.47 and Brent up 0.2% to $71.54. Tiny moves, but still holding the break. Gold is at $1347 despite the rally in stocks – something to watch – while Dr copper dipped about 0.4% to $3.075 which might be one of the restraints on the Aussie.
And for the unintended consequences file, the US sanctions on Russian companies continued to power aluminium prices higher with a gain of 4.99% on the LME.
Oh, and bonds. US 2's are still rising at 2.39% while US 10's are at 2.82%. The 2/10 curve is at 42.90. Worth noting the Fed has signalled worries on inversion – that’s all.
And finally, President Trump announced more details of the upcoming summit with North Korea after meeting Japanese PM Abe in Washington. The IMF also released their upgraded – slightly – forecast for global growth this year at 3.9% with a similar outcome expected for 2019. Yes, trade tensions are a headwind but that’s pretty solid. And of course reflecting that solidity, and especially of US growth, the multitude of Fed speakers last night highlighted rates are going up because inflation is heading up.
To the day ahead then and it’s quiet here in Australia with just the Westpac leading index out. But Japan has trade data while China releases house price data. Tonight’s PPI, RPI, and headline inflation data in the UK will be important for the Pound and expectations about the upcoming MPC meeting. And speaking of central banks the BoC has a meeting this evening – no change is expected.
On the earnings front in the US we get Morgan Stanley (NYSE:MS), US Bancorp (NYSE:USB), and Amex (NYSE:AXP) as the headline acts.
h2 Here's What I Picked Up (with a little more detail and a few charts)/h2 h2 International/h2
h2 Australia/h2
minutes yesterday? I did and they felt like the RBA was trying to lipstick the pig. Okay, Okay. I might be overegging it because the IMF just said overnight it agreed with Treasury and the RBA’s optimistic growth forecasts. So the RBA is on solidish ground. But when I read the minutes I got a real sense the RBA is genuinely worried about households. That’s important because while the GDP calculation of C+I+G+(X-M) can still be solidly positive if one sector is struggling while others do well there is a real sense that the C bit, consumers, consumption, households, is struggling. For me that is why the RBA spends so much time talking about unemployment and wages. It knows population growth is a big factor driving GDP but that at an individual household level things are less rosy than the overall GDP would otherwise suggest. So rates will be on hold for some time. At least another year is my guess. Here’s the key bit from the minutes, “In current circumstances, members agreed that it was more likely that the next move in the cash rate would be up, rather than down. As progress in lowering unemployment and having inflation return to the midpoint of the target was expected to be only gradual, members also agreed that there was not a strong case for a near-term adjustment in monetary policy”. h2 Forex/h2
h2 Commodities/h2
Have a great day's trading.
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