Axi | May 22, 2018 09:54
Originally published by AxiTrader h2 Market Summary (7.46 am May 22 2018) /h2
Commodities and commodity currencies have celebrated like its 1999 in the past 24 hours but the S&P 500 has finished a little more circumspect. Unable to push through last week’s peak or hold the best of the overnight highs the 500 index rose a solid 0.7%, 20 points, but it could have been more.
Part of that inability to hold the best of the gains is some skepticism about the detail, or lack thereof, in this deal with China. Mark Zandi, Moody’s US chief economist, called it “face saving” and a “lose lose” because “they’re not going to come to terms on anything – at least not in the near term”.
And for all of Treasury Secretary Mnuchin’s cheerleading a few words in a Presidential Tweet suggests Zandi might be right. Those words, “potential deal with China” and the fact there are no details on intellectual property, mean that we have a truce not a deal.
Indeed, trade negotiator Lighthizer said the Chinese intellectual property issues are far more critical than the trade gap.
But the fact that there is little chance of a deterioration in relations right now is all that forex and commodity traders needed to hear. As a result copper is up 1.15% to $3.09 a pound. That’s, naturally, helped lift the Australian dollar with AUD/USD gaining 0.98% to 0.7585 while AUD/JPY is 1.2% higher at 84.22. Likewise the kiwi and Canadian dollar are stronger as well with gains of 0.45% and 0.65%.
Of the other majors, the euro was pummelled on talk of a parallel currency in Italy – you’ll hear a little more about mini-BoTs I’m sure. But the sellers ran into a wall around 1.1716 and the single currency is back at 1.1793. The pound broke down as well on worries about UK politics, elections and a 2nd Scottish referendum. It’s at 1.3430, down 0.3%. USD/JPY is mildly higher given the risk on tone. But at 111.02 it’s a little more than 30 points off the high.
Back to stocks now and the Dow had a cracking night rising more than 1%, 298 points, to 25,013. But, remember this is not a capitalisation weighted index – it's driven by the stock/s with the highest share price. So to that end it’s important to note Boeing (NYSE:BA), the Dow’s highest priced stock, was also the biggest mover.
The Nasdaq 100 was up 0.6% while the FTSE in London rose 1%. It was Whit day in Germany so the DAX was closed but Italian stocks and bonds came under intense selling pressure. Some comments from ECB governing council member Nowotny about nervousness around the policy of the new government highlights what markets are thinking right now.
The washup for the local market though is not as you might expect at first blush. At least not based on what SPI traders have done overnight. At 6080 the SPI is down another 13 points after a poor close yesterday on the ASX 200 physical at 6,084. So we’ll see what the day brings.
In other commodity news fresh sanctions on Venezuela after the weekend election – including on bond buying – and a belligerent speech from US Secretary of State Pompeo on Iran turned traders from some mild selling back to the buy side. The result is WTI is up 1.6% and Brent has risen 1.17% to $71.42 and 79.45 respectively. Gold is calm at $1292.
US 2's are a little higher at 2.57% and the 10's are sitting at 3.05% just a point lower than Friday’s close. The US Treasury issued around $100 billion of 3 and 6 month bills overnight while Fed speakers continued to suggest rates are still on track for 2, perhaps 3, more hikes this year.
On the day ahead it’s fairly quiet. More Fed speeches, a swag of BoE speakers and then the CBI industrial trends index before the Richmond Fed manufacturing index tonight in the US. Quiet.
h2 Here's What I Picked Up (with a little more detail and a few charts/h2 h2 International/h2
Twitter that TopDown Charts posted. The key here Callum Thomas says is “Margin debt growth is decelerating - watch out if it starts contracting”. Just like Australian housing. Without fresh debt prices stop rising. Remember what Tom Demark says. Tops aren’t formed when sellers step in, it’s when buyers disappear. I am not predicting a crash, just something to watch folks.
And here is a link to Callum’s full blog on the topic.
h2 Australia/h2
h2 Forex/h2
Have a great day's trading.
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