Quick recap
Nudge Nudge, wink wink, a whisper from the Saudi’s and Crude Oil is up 4% this morning, stocks have ripped higher on its coat tails, bonds have sold off, gold is down, and John Williams from the San Fran Fed says a rate hike this year is appropriate.
What You Need To Know
International
- Stocks are rising with Crude which has had a cracking day. The S&P 500 is up 0.47% at 2186, the Dow Jones Industrial Average is up 0.64%, and the Nasdaq 100 is 0.46% higher at 5229. What's remarkable about that is all three indexes closed at all-time highs. That's the first time that has happened since 1999.
- For context I've put in the weekly chart of the S&P 500 which shows the target for the rally, reversal and then break - Fibonacci terms is 2221. I'm not onh it though...too greedy, waiting for another pullback which never came...yet anyway.
- San Fran Fed President John Williams says the Fed will hike at least once this year and the Reuters survey tends to agree with him. But not during the election campaign with only a handful of respondents thinking September of November. But around 70% are thinking December is the meeting when the Fed will move again.
- Williams said “As the economy gets closer to its goals, we can again pull our foot off the gas a bit and hopefully execute a nice, soft landing over the next couple of years".
- That’s especially the case because wages growth is accelerating in the US. It’s easy to poo poo the recovery in the US. It reminds me of all the doom saying about the Australian economy. Yes it does feel like the Oz economy might be really slowing now but for many years the doom and gloomers were wrong and the economy – especially consumers – defied them. The US has headwinds, and growth is slow. But it’s also steady.
- Rates in the US lifted overnight with the 10 up at 1.57% but as the BoE buys bonds and the Reuters survey says the UK is headed into a mild recession and the BoE will cut again Gilts continue to be well bid around half a per cent.
Australia
- The banks were hammered again yesterday, and the the ASX200 finished down 36 points at 5508. But the rally in US stocks, and the surge in oil, seems to have emboldened futures traders and the SPI 200 is up 32 points, 0.6%, at 5.24am this morning.
- Whether that is a reasonable move in no small measure depends on the banks. Yesterday their fall accounted for about half of the overall index dip. So it’s worth noting that while energy shares on the S&P are ripping higher, and would be expected to do the same in Oz today, financials are only up 0.21% on a sector level in the S&P 500. So 30 points or more could be a little optimistic by days end. We’ll see.
- I'm looking for levels to sell the SPI 200
- There is no data out in Australia today. BUT Chinese data today which includes retail sales, industrial production, urban investment, and new loans will be closely watched.
- Speaking of data – yesterday the Melbourne Institute’s inflation expectations survey showed a 0.2% dip in consumer’s view on where inflation is headed. 67.9% of respondents said they don’t know but think inflation will fall between 0-5%. But those who took a guess saw their expectations of inflation dip to 2.2%. This is a bit of a confusing report because MI actually reports the headline survey as a fall of 0.2% to 3.5% - I assume that’s the response of those who did take a guess.
- Oh and the Ausgrid block by federal treasurer Scott Morrison – lots of hand wringing and finger pointing but Bloomberg sums it up nicely. In a piece titled “China’s $15 Billion Energy Ambitions Crushed Within Two Weeks” Bloomy draw a link between Ausgrid and the recent block of the Nuclear plant in the UK and quotes Tao Jingzhou, a managing partner at Dechert LLP in Beijing who said “As China’s diplomatic policies become more and more assertive, there’s a trend that these countries are gradually enhancing their vetting on Chinese investment. This is an attitude change”. Yup.
- The NSW government bought back a coal exploration licence from BHP it announced yesterday. The licence was for the Liverpool plains and cost $220 million to repurchase.
Forex
- The AUD/USD looks really toppish up here at 77 cents at the moment. It’s had two days where it tried to get up and through 0.7750 but has failed and is back at 77 cents. There is some solid overhead resistance from the 2013 start of the big down move which traders appear to be watching.
- Here's the weekly chart - time to sell me thinks
- The NZD/USD looks similarly toppy. It’s frustrating for the RBNZ that the NZDUSD went up after they cut rates and promised more. But as I set out yesterday in my piece at AxiTrader the relationship between interest rates and the Kiwi has broken down in recent years. But that didn’t stop RBNZ Assistant Governor John McDermott trying to remind the market there were downside risks.The Kiwi looks headed lower though.
- Elsewhere the US dollar is a little stronger, reinforcing the toppy look in the Aussie and Kiwi, with the Euro at 1.1140, USDJPY at 101.89 and pound at 1.2963. The USD/CAD is stronger however with USDCAD down at 1.2962 as the CAD benefits from the surge in oil.
Commodities
- Reuters reported the Saudi oil minister suggested that there is, actually, the possibility that next months talks will include a discussion on what to do to help stabilise prices in the market. That and the fact the IEA says energy markets will tighten in the second half – with a material draw on stocks in this third quarter – combined to drag the buyers back into the market. Via Reuters the IEA said, “Oil's drop ... has put the 'glut' back into the headlines even though our balances show essentially no oversupply during the second half of the year". Worth noting it’s about the Saudi’s because Oil initially dipped on the IEA report.
- Technicall the move in WTI, for example, is a big one given it is an “outside day” (lower low and higher high than the previous day) and it also took out the trendline of the recent downtrend. Let’s see how it closes the week but price wise it’s looking positive.
- With Crude rocketing Gold is on the back foot again and trying to break down and through the trendline support once again. It’s sitting at $1337 at the moment and looking like it does want to test lower levels
- Copper is back at $2.1885
- Iron ore is down a little in US futures again.
Today's key data and events (all times AEDT)
- Australia - Nil
- New Zealand - Business NZ PMI (Jul) (8.30am); Retail Sales ex Autos (QoQ) (Q2), Retail Sales (QoQ) (Q2) (8.45am)
- China - Retail Sales (YoY) (Jul), Urban investment (YTD) (YoY) (Jul) (12pm); Industrial Production (YoY) (Jul) (3.30pm)
- Japan - Foreign investment in Japan stocks (Aug 5), Foreign bond investment (Aug 5) (9.50am)
- Germany - Consumer Price Index (YoY) (Jul), Consumer Price Index (MoM) (Jul), Harmonised Index of Consumer Prices (YoY) (Jul), Harmonised Index of Consumer Prices (MoM) (Jul), Gross Domestic Product n.s.a (YoY) (Q2), Gross Domestic Product s.a (QoQ) (Q2), Gross Domestic Product w.d.a (YoY) (Q2) (4pm)
- EU - Gross Domestic Product s.a. (QoQ) (Q2), Gross Domestic Product s.a. (YoY) (Q2), Industrial Production s.a. (MoM) (Jun), Industrial Production w.d.a. (YoY) (Jun) (7pm)
- UK - 10-y Bond Auction (n/a)
- Canada - Nil
- US - Retail control (Jul), Retail Sales ex Autos (MoM) (Jul), Retail Sales (MoM) (Jul), Producer Price Index (YoY) (Jul), Producer Price Index ex Food & Energy (MoM) (Jul), Producer Price Index (MoM) (Jul), Producer Price Index ex Food & Energy (YoY) (Jul) (10.30pm); Reuters/Michigan Consumer Sentiment Index (Aug), Business Inventories (Jun) (12am); Baker Hughes US Oil Rig Count (3am)
Have a great day's trading
Greg McKenna
Chief Market Strategist AxiTrader
www.gregmckenna.com.au
Please note: I usually look at 2 or 3 charts each day. These will not always be the same charts and the above is meant to help guide traders thought processes not offer advice.
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