Quick Recap
Stocks edging higher again, frustrating the bears but reflecting all the cash on the sidelines…Crude roaring another 3% higher as the Saudi’s and Russians get busy, gold and copper up, the Aussie too, but the Us dollar is a smidge lower while GBP is under 1.29.
What You Need To Know
International
- US stocks were higher again overnight and are up in fresh all-time high region again. The S&P 500 is up 0.34% at 2191, the Dow Jones Industrial Average is up 0.36% at 18643, and the Nasdaq 100 has gained 0.59% at 5263. I touched on the wall of money sitting on the sidelines for what seems months now and it remains the stock markets best friend as Jeffries suggested over the weekend.
- But do you hate the stock market rally? Well the haters, just gonna hate but maybe they have a point. That’s certainly the case if this chart via the SoberLook Twitter feed is any indication. We all know what brent Crude is and the MSCI ACWI captures large and mid cap stocks across 23 Developed Markets (DM) and 23 Emerging (EM) countries. With 2,481 constituents, the index covers approximately 85% of the global investable equity opportunity set.
- There is naturally two ways to resolve that. Stocks fall or oil rises. Or the correlation could break down completely as it has recently.
- The Wall Street Journal has told Trump to get serious or get out.
- Japanese data yesterday was terrible. 0.2% for the year – blimey. Japan is stuck, monetary policy isn’t working, the yen is too strong for a moribund economy, and Abe’s fiscal stimulus isn’t a great departure from what we’ve seen in the past 20 years. Yet the USD/JPY strength persists. Cue the rational and efficient markets folks admitting they might be wrong…sorry dreaming there for a sec.
- The discussion about the future of central banking and monetary policy continued overnight with San Francisco Fed President John Williams the latest to add his voice to the growing chorus saying that things can’t stay the way they are. Williams suggested raising the 2% inflation target or moving to other target measures based on price or economic growth. Jackson Hole anyone?? But he also signalled that fiscal policy has to do more as well and lazy politicians relying on central bankers to dig them out of economic holes need to do more.
- Data in the US saw the collapse of the New York empire state manufacturing index which fell to -4.21 from 2.5.
Australia
- BHP Billiton Ltd (AX:BHP) and Rio Tinto Ltd (AX:RIO) weighed on stocks yesterday but they have had a marginally positive night as we await BHP’s report at 6pm tonight (Bloomy page had BHP yesterday so apologies). Interesting action yesterday was the rally in NAB even though bad debts are rising and profits are down. JB Hi-Fi had a cracker – maybe retail sales aren’t dead, although I note the CEO on the Business last night said tech is not necessarily reflective of overall consumer mood – and Ansell fairly burst higher on talk it might sell the condom division.
- This all fits with the thesis that most action would be at an individual stock level not at the index. So in the end we saw a 9 point rally yesterday and SPI futures are up another 8 points this morning. Dominoes is probably the highlight today – just because I like hearing how they are not really a Pizza company J
- On the economic front we have ANZ Roy Morgan weekly consumer confidence and then of course the RBA minutes. No one is expecting anything interesting or surprising from the minutes so as a result we could get something – maybe an extra dose of dovishness from the board???
Forex
- Only fairly modest movements in forex market last night but the AUD/USD found support once again as the US dollar was a little weaker. No point overthinking it. As fears of the Fed tightening recede US dollar buying does likewise and then the Aussie has a confluence of support around the lows of Friday/Monday.
- Elsewhere at 1.2877 GBP/USD looks like it just want’s to dip under 1.28 to satisfy the markets desire to retest the post Brexit lows. Where to from there is interesting but there is no reason yet to buy GBP. Euro is up near resistance and 1.12 at 1.1184 while unsurprisingly USDJPY ignored the data and is at 101.23.
Commodities
- Traders now have confirmation from the Russian Energy Minister Alexander Novak that it is true Russia and the Saudi’s are talking about production. The thought process of traders was neatly summed up by Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates who told Reuters “While we see very little possibility of an actualization of curtailed OPEC output, there will likely be enough chatter during the next five to six weeks to deter selling in allowing WTI to gravitate at around the $45 area, at least through the second half of this month”.
- Prices are up 3.12% for WTI at $45.88 with Brent up 3.24% at $48.49. WTI is getting close to overhead resistance….it will be interesting to see where it goes and if it can break. If it can and then best $46.90 then away we go back above $50.
- Gold is higher again after respecting the recent range low around $1329/30. It’s sitting at $1339.
- Copper bounced a little to $3.15 a pound and iron ore futures in New York were a little lower.
Today's key data and events (all times AEDT)
- Australia - New Motor Vehicle Sales (MoM) (Jul), New Motor Vehicle Sales (YoY) (Jul), RBA Meeting's Minutes (11.30am)
- New Zealand - Nil
- China - Nil
- Japan - Nil
- Germany - ZEW Survey - Current Situation (Aug), ZEW Survey - Economic Sentiment (Aug) (7pm)
- EU - Trade Balance n.s.a. (Jun), Trade Balance s.a. (Jun), ZEW Survey - Economic Sentiment (Aug) (7pm)
- UK - Retail Price Index (YoY) (Jul), Retail Price Index (MoM) (Jul), DCLG House Price Index (YoY) (Jul), Producer Price Index - Output (YoY) n.s.a (Jul), PPI Core Output (MoM) n.s.a (Jul), Producer Price Index - Output (MoM) n.s.a (Jul), Producer Price Index - Input (MoM) n.s.a (Jul), Producer Price Index - Input (YoY) n.s.a (Jul), PPI Core Output (YoY) n.s.a (Jul), Consumer Price Index (MoM) (Jul), Core Consumer Price Index (YoY) (Jul), Consumer Price Index (YoY) (Jul) (6.30pm); Inflation Report Hearings (7pm)
- Canada - Manufacturing Shipments (MoM) (Jun) (10.30pm)
- US - Housing Starts (MoM) (Jul), Building Permits (MoM) (Jul) (10.30pm); Consumer Price Index Core s.a (Jul), Consumer Price Index (MoM) (Jul), Consumer Price Index n.s.a (MoM) (Jul), Consumer Price Index (YoY) (Jul), Consumer Price Index Ex Food & Energy (MoM) (Jul), Consumer Price Index Ex Food & Energy (YoY) (Jul) (10.30pm); Redbook index (YoY) (Aug 12), Redbook index (MoM) (Aug 12) (10.55pm); Industrial Production (MoM) (Jul), Capacity Utilization (Jul) (11.15pm); 52-Week Bill auction, 4-Week Bill Auction (1.30am); API Weekly Crude Oil Stock (6.30am)
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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