A New Record For The Nasdaq

Originally published by AxiTrader

Market Summary

The Nasdaq made a fresh record high overnight as traders awaited the results of Google (NASDAQ:GOOGL) parent Alphabet (NASDAQ:GOOG) with some positive expectations. The rally of 23 points, 0.36%, saw the Nasdaq composite close at 6410. The Dow was down 0.31% but the S&P 500 was largely unchanged with a fall of just 2 and a bit points.

Europe had a quieter night after Friday’s big fall while the rally in oil, gold's strength, and financials performance offshore – not to mention a solid bounce off support yesterday – has emboldened SPI traders to bet on a more positive performance from the S&P/ASX 200 when it opens today. The SPI is up 15 points.

In currency markets data drove the US dollar a little higher against the euro and yen but the commodity bloc bulls haven’t given up on the Aussie, kiwi and Canadian dollar just yet. The AUD/USD is sitting at 0.7924 this morning.

It’s a relatively quiet day today with the release of just the ANZ weekly consumer confidence index in Australia. German Ifo will be important for forex traders and ECB watchers tonight while the CBI Industrial trends survey will be watched closely as well. In the US Case Shiller house prices and the Richmond Fed index are the highlights.

BoE MPC member Andrew Haldane is also speaking.

Here's What I Picked Up (with a little more detail and a few charts)

International

• The flash PMI data released over the past 24 hours was a little less positive for Europe and a little more positive for the US. Markets reported that EU manufacturing PMI dipped to 56.8 from last month’s 57.4, services PMI printed 55.4 (the same as last month), while the composite of the two printed 55.8 from last month’s 56.3. All prints were lower than expectations. Of note the German composite PMI dropped to 55.1 against expectations of 56.3 and from 56.4 last.

• In the US the composite PMI lifted to 54.2 from 53.9 while the manufacturing PMI jumped to 53.2 from 52 last. Services stayed unchanged at 54.2 but all reads were better than expected which helped the US dollar against the euro overnight and saw rates rise marginally in the US. This data could give some succour to the Fed’s outlook for growth going forward.

• The fall in US home sales is something to watch on that front however.

• We need to keep an eye on the short end of the US interest rate curve. That’s because it seems like traders and investors are genuinely worried that the derailing of the Trump presidency by the Russia probe, the focus on health care reform, and a general gridlock in Washington means that an agreement to raise the debt ceiling may not be made. That’s seen the US 3-month rate move above the 6-month rate over the past few days.

• The IMF upgraded the outlook for Chinese growth amid some subtle but important changes to its global outlook yesterday. Of note the IMF downgraded both the US and UK growth rates for this year, upgraded Europe while overall keeping the outlook for the global economy unchanged at 3.5% for 2017 and 3.6% for 2018.

• Chinese iron ore prices were down again yesterday as the selling extended into a 3rd day after stockpiles rose by 750,000 tonnes last week to 140.45 million tonnes Reuters reported.

• On the political front it seems like Jared Kushner might have taken some notice of last week’s entreaty from the Wall Street Journal’s editorial board that president Trump and those around him should disclose everything and get in front of the investigation. Overnight he met with the Senate committee looking into the Russia allegations and then held a briefing at the White House where he said he did not collude with Russia, knows of no one in the administration who did and highlighted that “Donald trump had a a better message and ran a better campaign, and that is why he won”. On that he is dead right. Hillary didn’t lose – Trump won. But the “Russia thing” is the Damoclean Sword overhanging his administration.

Australia

• It was an awful day on the S&P/ASX 200 yesterday with weakness across the board. It could have been worse though with the physical ASX breaking down and below the wedge I highlighted before the buyers stepped back in to see the index close a relatively positive -35 points at 5,688. That I can characterise a 0.61% fall as positive is a testament to how weak the index was looking around lunchtime yesterday with the banks and miners under intense pressure.

• But what was important is that the SPI managed to hold above support while the physical also bottom in what looks like a very important 5,650/70 region.

• Overnight the SPI has had a much better session rising 17 points, 0.3%, to take back around half of yesterday’s loss. Gold, oil, and financial stocks are all higher overnight so there is every chance that – along with the evidence of support yesterday – the local market has a much better day of it today.

• Looking at the economy now, it’s worth highlighting a good point the NAB’s economics team made about the outlook for the RBA and interest rates. Via Business Insider the NAB says that “The pace and extent of the reduction in unemployment and underemployment, plus the progress of inflation back to the RBA’s 2%-3% target band, are key for when the RBA begins to normalise Australian interest rates”.

• It’s impossible to argue against that view. Indeed I hold a similar outlook. Yes the NAB’s business survey shows solid prospects for the economy but the RBA has been consistent in its focus on both unemployment and inflation. There is still work to be done on both these fronts – especially underemployment as you can see in the chart below – which suggests the RBA is in no hurry to raise rates yet. That’s something the CPI data, and RBA governor Phil Lowe are likely to reinforce tomorrow.

• And while I’m talking about the outlook for the economy and RBA rates it is worth noting that UBS Australia yesterday put out a note saying that the housing market could crash if the RBA raises rates too quickly. It’s worth noting that the RBA knows this, the RBA won’t want this, so the RBA won’t do this. It’s why the discussion on the neutral rate at the last board meeting was important. Not because the RBA was signalling rates will rise. Rather because the RBA was signalling that if its forecasts are right on growth then when it starts to raise rates they won’t need to go too far or too fast. Rant over