Tag Archives: Europe & UK

article 3 months old

The Monday Report

By Greg Peel

Uncertainty

It was a wild old ride on Bridge Street on Friday – not very “Friday” at all. The ASX200 was down 50 from the open and then up 50 mid-session, before fading to close up 23. The only sector to finish in the red was energy, with a distinct 1.6% fall.

The volatility mimicked a similar response on Thursday on Wall Street to the Fed’s rate decision, or more accurately lack thereof. Wall Street ultimately closed lower on Thursday night but not with any great conviction, reflecting indecision about whether the Fed’s message was a good one (lower rates for longer supporting asset prices) or a bad one (US economy not strong enough, global growth concerns).

The ASX200 thus also opened lower, helped by weaker oil prices, but it seems the buyers thought “why do we need to go lower?” If it’s all about a slowing China well we’ve already adjusted for that issue. That’s why we’re holding above 5000 and not testing 6000 as we were earlier in the year. And the Aussie has come right back towards a more “fair value” level, offering long-awaited support for the Australian economy.

Which is exactly the way Glenn Stevens saw it as he testified before a parliamentary committee on Friday, which the RBA governor is obliged to do every six months (not quarterly, as I erroneously suggested last week). If Janet Yellen was playing up the China fear in her press conference, Glenn Stevens was playing it down. And between the US and Australia, it is Australia more directly linked to China’s economic performance.

The Australian economy is doing okay, Stevens implied, and we will eventually see the benefits of the weaker currency flowing through.

Frustration

The smart money had stood aside on Thursday night on Wall Street as the headless chooks ran around, and returned on Friday night to decide the response was to sell. While the reasons why it was a sell call are debatable, I think we can now finally put to bed the notion of “bad news is good news” for Wall Street. If that thematic were still the rule, the Dow would have been up 300 points on Friday night.

As it was, the Dow closed down 290 points or 1.7%. The S&P lost 1.6% to 1958 and the Nasdaq fell 1.4%.

The falls followed a lead-in from Europe of a 3% fall in Germany, 2.5% in France and 1.5% in the UK, which followed a 2% fall in Japan. Clearly the world was not enamoured with the Fed’s decision.

Why?

Is it because no rate rise implies the US economy is not strong enough? No. Apparently the FOMC’s decision was a very close run thing and thus the deciding factor was concerns over global growth, meaning China and emerging markets, and market volatility, which in theory is meant to be no concern of the Fed’s. So were markets down because if the Fed is worried about China, perhaps the world should be more worried about China than it previously has been?

There is certainly an argument here, and that’s the way commodity markets saw it on Friday night as well. But there’s also the argument that the volatility the Fed is worried about is just as much to do with Fed uncertainty as it is to do with China. In other words, the Fed has said “we won’t raise while the markets are volatile” yet by not raising it has assured that markets will remain volatile on ongoing uncertainty. Investors are frustrated, and have decided to sell rather than go through another tiresome round of “will they/won’t they?”

From Wall Street’s perspective, Friday night’s move was also clouded by the fact it was quadruple witching derivatives expiry, which can move markets substantially independent of any fundamental influences. Friday saw one of the heaviest volume days for the year on the NYSE, and that’s all about expiries. Thus if the selling was all about quadruple witching, we’ll have to wait to tonight to see what Wall Street really thinks.

The US ten-year yield lost another 9 basis points on Friday to 2.13%, so we’re back below the starting point of selling ahead of what the US bond market clearly assumed would be a rate rise. But there is also another influence on US bonds we should consider.

Someone out there holds more US bonds than anyone else, and is currently spending a lot of money propping up its economy and share market and thus needs some funds. Weakness in US yields has been attributed to the added element of Chinese sales.

Spooked by the 300 point Dow fall, the local SPI futures closed down 76 points on Saturday morning. That would take us back down to 5100, which is still 100 points above what has so far proven impenetrable support at 5000. If Friday was a buy, then today is a buy on the opening drop, assuming nobody’s changed their minds over the weekend.

And a weekend is a long time in markets.

The good news is that the weekend brought Alex Tsipras and his Syriza party re-election in Greece, with only a handful of seats lost. This suggests a vote to suffer the strict austerity regime placed upon Greece by its creditors, even though Syriza was first elected on exactly the opposite ticket.

The main opposition was pro-austerity anyway, so that wasn’t an issue. But with the majority of Greek voters now resigned to their lot, presumably the rumblings of discontent will subside and the word “Grexit” will be consigned to the shelf.

The IMF-EU-ECB will also be heartened that Greece’s ultimate submission has sent a message to any other eurozone anti-austerity groups that “you can’t fight the troika”.

Commodities

Oil was the main focus on Friday night, as West Texas once again plunged 4% or US$1.99 to US$44.92/bbl and Brent fell 3% or US$1.50 to US$47.74/bbl. The falls carried on from the immediate post-Fed response on Thursday night.

But WTI finished the week exactly where it had started. It was bid up all week on an expected Fed rate rise, and sold off when that didn’t happen. Had the Fed raised, it would have removed uncertainty and settled markets but also sent a message that global growth is not a worry. The opposite was true. So oil prices fell back, as did base metal prices.

LME prices had been largely stronger ahead of the Fed meeting, and on Friday night copper and zinc fell 3%, lead and nickel 2%, tin 1.5% and aluminium 0.5%.

The US dollar actually recovered on Friday night all it lost on Thursday night post the Fed’s non-decision. The dollar index rose 0.8% to 95.15. This would not have helped commodity prices.

Iron ore ticked up US30c to US$57.10/t.

And gold rose again, by US$7.70 to US$1139.90/oz. Call that a delayed response to no rate rise.

The Aussie is up 0.2% at US$0.7187, despite the US dollar gain. One wonders how long the short-covering support will last.

As noted, the SPI Overnight closed down 76 points or 1.5%.

The Week Ahead

It won’t just be the week ahead, but the quarter ahead, in which we’ll be debating whether the Fed might raise.

Shoot me now.

Is the Fed still “data-dependent”? And if so, whose data? America’s or China’s? On Wednesday we’ll see Caixin’s flash estimate of Chinese manufacturing PMI for September, and if you recall, it was Caixin’s August estimate that sent the proverbial hurtling into the fan a month ago.

Flashes will also come from the eurozone and US, with Japan a day later. Japan is closed until Thursday.

The US will also see existing home sales tonight, FHFA house prices and the Richmond Fed index tomorrow, new home sales, durable goods and the Chicago Fed national activity index on Thursday, and a flash services PMI estimate, fortnightly consumer confidence and another revision of June quarter GDP on Friday.

A quiet week economically for Australia sees a June quarter house price index tomorrow as the only highlight.

On the local stock front, TPG Telecom ((TPM)) will release its FY15 result tomorrow, Nufarm ((NUF)) on Wednesday and Brickworks ((BKW)) on Thursday.

The ex-div season starts to wind down with only a handful this week, but from now the AGM season starts to ramp up, with Suncorp ((SUN)) among the early birds this week. Telstra ((TLS)) will also begin a series of shareholder meetings across the country today.

Rudi will appear on Sky Business on Wednesday at 5.30pm and on Thursday at noon and again between 7-8pm for the Switzer Report. On Wednesday night, 8-9.30pm, Rudi will host Your Money, Your Call Equities on the same channel.
 

For further global economic release dates and local company events please refer to the FNArena Calendar.

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article 3 months old

The Overnight Report: Job Watch

By Greg Peel

The Dow closed up 23 points or 0.1% while the S&P gained 0.1% to 1951 and the Nasdaq fell 0.4%.

Lacking Discretion

There were actually a lot of similarities between Wednesday morning’s trade on Bridge Street and yesterday morning’s trade on Bridge Street. On Wednesday morning, second-wave selling, spurred on by weakness on Wall Street, sent us down 70-odd points from the open. At 11.30am, the disappointing GDP was result was released but the index initially bounced before heading south again.

By yesterday morning at 11.30am we were down 50-odd points before the retail sales result was released. The difference is we were actually up 70 points from the opening bell, so this time we fell 120 points to 11.30am. When the disappointing retail sales number came out the index briefly bounced, before heading south again.

On Wednesday afternoon, the buyers arrived and pushed us back to flat for the session. Yesterday afternoon, those buyers were otherwise occupied. The late buying on Wednesday, and a positive session on Wall Street, encouraged buying from the open yesterday. But the sellers were biding their time. The index was not bought up from the open, it simply “fell into an upward hole”, as we say in the market, where the offer prices had been pulled right back.

Then someone said “Now!” and in they came. Yesterday morning told us the second wave of selling is not yet exhausted, as we might have hoped by Wednesday’s close. By lunchtime, the damage had already been done. All sectors had fallen by fairly even percentages, indicating “market” selling. The drift-off in the afternoon reflected the weak retail sales number, such that the consumer discretionary sector closed down 3.2% when all about lost about 1.5% (except consumer staples, which likely saw some switching to be down only 0.3%).

The consumer sectors saw switching because the 0.1% fall in retail sales in July, against expectations of a 0.4% rise, was split into a 0.6% fall for discretionary and a 0.5% gain for staples. The fall in discretionary was largely due to a big fall in spending on household goods. This is the element that took economists by surprise, but on reflection, they have realised that household goods spending was the driver of solid retail sales numbers in both June and May. In the first month of the new financial year, it appears households took a breather.

So we might conclude that yesterday’s sales numbers were not quite as bad as they appeared at face value.

That just leaves us with the question of whether or not the general selling is now exhausted. It would be foolish to call this, particularly ahead of the US jobs report tonight, the Fed meeting in a couple of weeks and, let us not forget, another Greek election soon to be held.

Whatever More It Takes

With Greece under a current caretaker government, China has been able to hog the spotlight this past month and send global markets into a spin. Such volatility has not been lost on the ECB, which held a policy meeting last night.

Mario Draghi did not name China specifically at his press conference, but cited a slowdown in emerging markets and a further decline in oil prices as posing fresh risks to a European economy already being propped up by QE. Lower oil prices should ultimately help the oil-importing eurozone but the payback is weak oil-producing trading partners and the deflationary impact of lower fuel costs.

The ECB’s last QE program began in March and at the time, it was slated to last through to September. So the central bank must now decide what to do next and as Draghi declared last night, an increase in QE is on the cards if deemed necessary. For a long time now, the ECB president has promised to do “whatever it takes”.

The response was a big drop in the euro and a big rise across European stock markets, including 2.7% in Germany, 2.2% in France and 1.8% in the UK.

Payroll Roulette

The buying carried across the pond onto Wall Street and by 11am in New York, the Dow was up 200 points. But given a 200 point gain in the previous session as well, it was time for the sellers to act.

The difference last night is that the sellers weren’t representing second-wave investor selling on general fear but rather traders squaring up ahead of tonight’s US non-farm payrolls report and the volatility that may well transpire. The Dow retreated in an orderly and almost leisurely fashion to be roughly square on the session, without heavy volume.

It’s also a long weekend in the US, when typically Wall Street clears out by lunchtime on Friday. So not much point in holding risky longs heading into tonight.

Square is the safest place to be when no one can tell you (a) how Wall Street will react if tonight’s number is good/bad or (b), how the Fed will react if the number is good/bad. There are plenty of opinions, but no consensus. The general feeling is that a forecast of around 220,000 means 170,000 is bad and 250,000 is good. But it has also been noted that seasonally, August tends to deliver a weak number. In fact, August jobs numbers have disappointed for eleven of the past twelve years.

But then if it’s bad, does Wall Street rally on the assumption the Fed won’t raise this month, and vice versa if it’s good? Such volatility will likely be on display, but we know that the smart money tends to stay out on the day as the headless chooks go berserk and come in the next trading day following more thoughtful consideration. My consideration would be what difference will it make in the scheme of things if the Fed raises in September, October or December? It’s going to raise either way. Get it over with.

And I’m prepared to bet a lot of people on Wall Street feel this way, and that ultimately a September rate rise will prompt a rally, if not on day one, particularly now that the market PE has come back to reality thanks to China.

Commodities

The oil market mimicked the US stock market last night in initially lapping up the promise of more stimulus from the ECB before fading away on a square-up. West Texas closed up US60c to US$46.65/bbl and Brent closed up US11c to US$50.55/bbl. You might be forgiven for thinking oil finally had a quiet night after the madness of the past couple of weeks, but actually WTI was up 6% at lunchtime.

The LME also saw fairly similar action, albeit there was divergence amongst metals. Initial price strength faded late in the day but still left copper up 2%, aluminium up 1.5% and nickel up 1%, while lead, zinc and tin were flat to slightly weaker.

With China on holiday, iron ore is unchanged at US$55.80/t.

Talk of more QE in Europe sent the euro plunging, as noted, hence the US dollar index rose 0.5% to 96.37. And hence gold fell US$8.90 to US$1124.90/oz.

We might say the stronger greenback is the reason why the Aussie is down 0.3% at US$0.7017 this morning, but over the past month there has been no direct (inverse) correlation whatsoever. On yesterday’s weak retail sales number, the Aussie took another little trip into the 69s before scrambling back to safety above 70. Having fallen 36% from 110, it seems at the moment that 70 is a bit of a line in the sand for the Little Battler.

Today

The SPI Overnight closed up 20 points or 0.4%.

China is closed again today.

The eurozone’s June quarter GDP result will be revised tonight, but is irrelevant after last night.

Everything hinges on tonight’s US jobs report.

Note that locally, the S&P/ASX will announce this quarter’s promotions and relegations into/out of their indices, including the ASX200, before the changes take effect in two weeks.
 

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(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's - see disclaimer on the website)

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article 3 months old

The Monday Report

By Greg Peel

Just A Flesh Wound

Another positive session on Bridge Street on Friday ensured the index actually finished up for the week, as did the grey hair count. But Friday’s session was all about commodity prices, and subsequent 3.7% gains for both the materials and energy sectors. Take those sectors out, and it was otherwise a typically quiet Friday featuring smallish moves.

The August reporting season effectively came to a close on Friday, and now that the volatility of last week appears to have settled down, at least for now, market attention can be concentrated on the score cards and assessments that will follow.

As FNArena’s Result Season Monitor winds to a close, we can note the beat/miss ratio is around 1.6 and the broker ratings upgrades to downgrades is around 3 to 1. If it wasn’t for what’s been going on in the macro realm this month, we might call it a successful season. If we compare it to the last February reporting season, it saw a beat/miss ratio of 1.1 and downgrades outnumbering upgrades almost 2 to 1.

The problem is that February’s result season occurred in a rally, after which the ASX200 closed at 5600 on its way to 6000. At that point, many an analyst was calling stocks overvalued, particularly yield stocks, hence the big downgrade count. In stark contrast, the August season occurred in a correction which accelerated as the month wore on. The index closed on Friday at 5260 having seen 4930, and at the back end of the season, a lot of those upgrades reflected oversold calls as a result of the market sell-off as opposed to micro valuation calls based on earnings results.

The good news for the beaten down commodity names is that commodity prices rallied strongly again on Friday night. The rallies were driven by a combination of short-covering and buying on a belief in oversold levels. At some point commodity prices will settle down again and consolidate, likely at levels lower than a couple of months ago but not as low as the depths of last week.

Relief

Wall Street, too, settled down a bit on Friday night and in S&P500 terms, finished the week higher. The Dow fluctuated on Friday between a hundred points down and unchanged, but in terms of last week, this was a quiet session.

All talk on the Street now is of whether the snap-back rally signifies a bottom is in place, or whether it is just a typical precursor to another leg down. Many assume it will all come down to the September Fed meeting on the 17th.

But to that end, central bankers around the globe don’t seem too concerned about recent market volatility, and also believe the markets are overblowing China slowdown fears. That was the mood emanating for the Jackson Hole symposium on the weekend, which was attended, among others, by the vice chairman of the Fed, the vice president of the ECB and the governor of the Bank of England.

Fed vice chair Stanley Fischer suggested in an interview that nothing that occurred last week will stop the Fed raising at the September meeting. This did not mean the Fed had already reached that decision, he added (personally, I believe otherwise), and it will still come down to data releases over the next two weeks. This Friday night’s US jobs report will basically be the decider, he hinted.

He also gave the first indication of what the move might actually be, suggesting the existing zero to 25 basis point funds rate would be moved to 25-50 basis points. But the most interesting point to note is that despite yet another almost-confirmation from a Fed official, Wall Street didn’t blink. It closed flat. Just how worried is Wall Street about that rate rise? Not all, I suggest.

And as an added element, the BoE governor said he expected to raise UK rates fairly soon. The BoE went very close in the wake of the London Olympics, which provided a big boost to the UK economy, until it became clear it was just a bit of a honeymoon.

Commodities

West Texas crude jumped US$2.71 or 6.4% to US$45.33/bbl on Friday night, to mark a 20% rally from the intraday low of a week ago. Brent rose US$2.30 or 4.8% to US$49.90/bbl.

There is little doubt short-covering was heavily involved, and one outside trigger cited by traders was news Saudi Arabia had sent troops into northern Yemen. News of tropical storms hitting Cuba provided a reminder hurricane season has now begun. Traders also cite genuine buying from those believing last week saw oil trading at oversold levels.

Another seasonal issue for the US oil market is nevertheless the end of the summer driving season, now approaching, and the annual refinery maintenance season which typically follows. When refineries shut down, crude supply builds up in storage centres such as Cushing, forcing down prices until maintenance is complete.

So as with Wall Street in general, there is debate over whether oil has seen the bottom, or could yet plunge once more.

In mixed trade on the LME on Friday night, aluminium, lead and zinc surged 3% and tin 2%, while copper and nickel stayed put. Copper is the only base metal not to close higher for the week. Again, short-covering has been cited among metals, and also the fact it’s a long weekend in the UK and thus the LME is closed tonight.

Iron ore jumped US$2.20 or 4% to US$55.50/t.

With margin call selling now easing, gold found renewed support on Friday. It’s up US$8.90 at US$1133.70/oz.

Commodities rallied on Friday night despite another gain for the US dollar, which is up 0.3% to 96.11 on its index. The Aussie is steady at US$0.7165.

The Week Ahead

The SPI Overnight closed up 12 points on Saturday morning.

As noted, this Friday night sees the US non-farm payrolls report. If it’s positive, lock in a September rate rise.

Over the course of the week, the US will also see the Chicago PMI tonight, construction spending and vehicle sales on Tuesday, private sector jobs, factory orders and the Fed Beige Book on Wednesday, and the trade balance and chain store sales on Thursday.

This week also sees PMIs from across the globe, with manufacturing numbers mostly due on Tuesday and services on Thursday. There are a couple of public holidays about the place this week nonetheless so some dates vary. China is closed on Thursday and Friday.

After a big month of earnings releases, suddenly it’s a big week for Australian economic data.

We’ll see June quarter company profits and inventories today, and the current account including terms of trade tomorrow, ahead of the GDP result on Wednesday. Economists are forecasting 0.4% quarter on quarter growth and 2.2% year on year growth, down from 0.9% and 2.3% for the March quarter.

Monthly data this week include the TD Securities inflation gauge and new home sales today, building approvals, house prices and the manufacturing PMI tomorrow, and retail sales, the trade balance and the service sector PMI on Thursday.

The RBA will meet tomorrow and leave rates on hold, but commentary around China and market volatility will be interesting.

There are a handful of tardy results reports to trickle in this week, but more notably this week sees the ex-divs starting to build. We’ve already had some biggies during result season, but over the course of September a substantial number of stocks will go ex, keeping a lid on prices.

Rudi will appear on Sky Business on Wednesday at 5.30pm and on Thursday at noon. Also, on Wednesday late (9pm) he will host Your Money, Your Call Equities.
 

For further global economic release dates and local company events please refer to the FNArena Calendar.

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article 3 months old

The Overnight Report: And On The Seventh Day…

By Greg Peel

The Dow closed up 619 points or 4.0% while the S&P gained 3.9% to 1940 and the Nasdaq jumped 4.2%.

Tentative

Investors taking the punt on buying the Australian market on Tuesday will no doubt have felt comfortable when turning in for the night as Wall Street staged a decent comeback, only to awake to find the rally had failed miserably at the close. This was the situation as the ASX200 opened yesterday with a swift 86 point plunge.

Whether or not the earlier 5100 support level still remains viable given we’ve been well below 5000 this week, the drop through that mark from the open appeared to bring the buyers steamrolling back in. On Tuesday we ignored the Chinese casino altogether. Yesterday we ignored Wall Street as well, albeit tentatively, as the index banged its head against the flatline several times before finally punching through in the afternoon.

The drivers of yesterday’s ultimate 35 point rally, or 121 from the intraday low, were the same large cap and index-dominant sectors that had been most heavily sold – the banks, materials, energy and supermarkets. On a 2.8% gain, energy was the clear winner, as investors pondered the reality that even at current low oil prices, some oil & gas names had simply been sold down too far. And for a couple of days, WTI crude has managed to hold its ground just under 40.

We could also cite a better than expected result on Australian June quarter construction work done, released late morning, as a fillip.

Desperate

The afternoon rally in Australia came despite a near 4% fall in Shanghai in the Chinese morning session, again confirming we’ve learnt to ignore such frivolity. But interestingly, Shanghai did then proceed to correct on its own, to be up by a similar amount after lunch, before fading away late in the session to close down 1.8%.

We know that the Plunge Protection Team remains suspended, so Chinese investors appear to be working it out for themselves, but that did not stop another typical knee-jerk, scatter-gun response from the authorities after the final bell.

Last night the PBoC injected US$22bn of liquidity into the Chinese banking system, following on from the previous night’s interest rate and RRR cuts. And then the government announced another witch hunt in the stock market, this time promising to search out fraudulent activity at the stock market regulator itself, insider trading within at least one securities firm, and rumour mongering in general. The state-owned press called for government to “purify” the market.

The state media also stepped up its campaign against the evil foreign forces behind the Chinese stock market rout, and particularly blamed the Fed.

No doubt the Chinese punters we see each night on the news in front of the Shanghai ticker are engaged in heated debate over the monetary policy vagaries of the US Federal Open Market Committee and the ramifications for the Chinese domestic economy, as they clutch their porcelain cats with waving arms and buy any stock named “Lucky” as long as there’s an 8 in the price.

Rebound

Stability on the Chinese market, and the PBoC’s injection of liquidity, were not enough to overcome nervousness on European markets last night. The late plunge on Wall Street on Tuesday night had Europe spooked, sending the major indices down around another 1.5%. But whereas typically the mood in Europe dictates the opening on Wall Street, this time it was different.

The US indices rocketed up from the open, sending the Dow up over 400 points. The snap-back was aided by positive US data, in a week when up to now, no one has been paying any attention to economics. US new durable goods orders rose 2.0% in July. While this is less than June’s 4.1% jump, it was much better than economists had expected. And importantly, the core measure (ex transport and defense) jumped 2.2% -- its biggest gain in twelve months.

The opening spike nevertheless proved to be just that, and by lunchtime the Dow was only up around 100 points. Oh no, here we go again, thought Wall Street. But along came Bill Dudley.

In days gone by, the Fed’s Jackson Hole central bankers’ symposium was where Ben Bernanke chose to hint at fresh QE. Then he stopped attending, and indeed Janet Yellen is not there this year. Nor is Mario Draghi, who usually pops in. So the Hole has lost its importance of late. But last night New York Fed president William Dudley caused a stir when he responded, having been asked whether recent global market volatility would impact on a possible September rate rise, that the case for a September move was now “less compelling”.

And on that news, Wall Street began to rally again. Never mind that Dudley went on to say that there’s plenty of time between now and the September meeting (20 days) for data releases to make September compelling once more. Either way, commentators suggest Dudley’s comments spurred on Wall Street because it means a September hike is now off the table.

Hello? Did no one else pick the absolute clanger in Dudley’s statement? Since when was the case for a September rate rise ever compelling in the first place, as far as Fed rhetoric has suggested up to now? All we’ve heard is maybe/maybe not, depending on the data. Dudley’s comments only serve to reinforce my personal view that the Fed long ago decided to hike in September, and that the ensuing data would not determine if it would, only if it wouldn’t. So far the data have offered no reason not to go ahead.

Furthermore, the Fed has always been anxious not to spark severe market volatility with its rate hike announcement, which is why it has been at pains to insist the market should not be scared of a rate rise per se, because the tightening process will be a very long and incremental one. Well guess what? We’ve now had that volatility. It’s now out of the way. And assuming Wall Street doesn’t plunge another 10% between now and mid-September, that rate rise is locked in.

By the way, the US ten-year bond yield rose another 4 basis points to 2.17%.

Whatever the case, by late afternoon it was apparent that the published sell-on-close orders for the session were nothing like the magnitude of Tuesday night. A short-covering rally ensued. By the close, the Dow’s 619 point, 4% rally represented the biggest one-day percentage in four years and the biggest points gain since the wild volatility of November 2008, when the Dow was only half the value it is now.

After six days of heading down, Wall Street finally rose. Unlike Tuesday night, last night featured heavy volume, extensive breadth, and a clear feeling of buyer conviction. No one is prepared to call a bottom yet, as usually there has to be nervous, choppy activity and a possible retest of the lows before a bottom can truly be called. But let’s just say there were a lot of smiles on the NYSE floor at 4pm.

Commodities

This was not the case on the LME. Despite the overnight Chinese liquidity injection, and despite the strong US durable goods number, copper plunged 2.8% last night. Tin and zinc also fell around 3%, while aluminium and lead lost 1% and nickel, for once, was relatively steady.

Iron ore fell US20c to US$53.10/t.

West Texas crude fell again, but only by US42c to US$38.88/bbl, while Brent actually rose US22c to US$43.67/bbl.

Not helping commodity prices was a big jump in the US dollar index, by 1.4% to 95.31, which accompanied the “risk on” trade on the stock market.

To that end, gold fell another US$15.20 to US$1125.10/oz, likely still feeling the heat of margin call selling.

Today

The SPI Overnight closed up 83 points or 1.6%.

Locally, today sees the release of June quarter private sector capex numbers.

Tonight the US June quarter GDP number will be revised.

And it’s another enormous day for the local results season.
 

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available in the FNArena Cockpit.  Click here. (Subscribers can access prices in the Cockpit.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's - see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

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article 3 months old

The Overnight Report: Schrodinger’s Bounce

By Greg Peel

The Dow closed down 204 points or 1.3% while the S&P lost 1.4% to 1867 and the Nasdaq fell 0.4%.

Night Watchman

Beijing finally acted last night, as they had been expected to do so ever since Friday night. It took another 7.6% fall in the Shanghai index yesterday, on top of Monday’s 8.4% fall, to spur the authorities into action. Maybe that phone call from Washington helped too.

The PBoC has again cut its interest rates, by 25 basis points for the lending rate to 4.60% and the deposit rate to 1.75%. It has also cut the bank reserve requirement ratio by 50 basis points.

Yesterday’s second big plunge on the Shanghai exchange is further evidence Beijing has apparently held back its Plunge Protection Team this time around, having wasted billions in foreign exchange reserves vainly attempting to hold up the stock market previously. But PPT efforts are immediate, while monetary policy tweaks take some time to flow through an economy. So it will be interesting to see whether Chines investors, if that’s what you call them, respond positively or disappointedly to the news today.

Snap-Back

The important point to note here is that the PBoC’s announcement came after the close of the Shanghai Exchange last night, hence long after the close of the ASX yesterday. Thus despite what you might read in the popular press today, the rate cut had nothing to do with yesterday’s rebound on Bridge Street.

And given the Shanghai index opened sharply lower at 11.30am Sydney time yesterday, we can suggest that those buying Australian stocks yesterday had decided the Chinese casino is really not much of an indicator of anything. A 16% fall in the ASX200 through the 5000 strong support level (reflecting the Chinese slowdown, sure, but more immediately representative of Wall Street waking up to itself) is a buying opportunity, they decided.

At least in the banks. For it was the banks that stood out distinctively in yesterday’s 2.7% rebound for the ASX200, driving a 3.9% gain for the financials sector. Next closest was materials, meaning the big two miners specifically, with a 2.4% gain. Energy, which was summarily crushed on Monday, managed only a 0.6% rebound. The telco actually went backwards by another 0.8% (ex-div).

One might ask: Just what impact does a Chinese slowdown have on Australia’s banks (ANZ’s Asia exposure aside)? They don’t lend much to Australian resource companies, who suffer most from a Chinese economic slowdown. There is no flow of manufactured goods from Australia to China of any note. Australian banks are predominately representative of Australia’s domestic economy – mortgages and business lending. The Aussie is now down to 71, and that’s good for business.

But in the bigger picture, was yesterday’s snap-back rally representative of a cat that is alive and kicking, dead, or simply pining for the fjords?

Such snap-backs are part and parcel of big corrections, and never will a stock market crash to a point and then V-bounce straight back into a bull market. It must first consolidate, and that usually means falling further yet to test intra-day lows. Typically when a market has cemented a bottom, it is not immediately apparent until you realise it seems to have stopped going down.

Yesterday morning the SPI futures were calling a 181 point drop for the ASX200. The index did fall as many as 73 points from the bell, which took us well below 5000 support to an intra-day low of 4928. Remember that number. Then the buyers formed ranks and marched in. By midday, the rebound was in place. There was little movement all afternoon, despite the Shanghai index quietly sliding away.

Presumably the market was waiting, all afternoon, for the expected announcement from the PBoC.

Failed

And so it came, just in time for the open of the ridiculously volatile European markets. Germany duly bounced back 5% and France 4%, and even the usually more staid London market rebounded 3%. The buying carried over into Wall Street, and the Dow shot up as well, to be up 440 points late morning as the European markets closed.

But traders were not convinced. The snap-back lacked breadth, lacked volume, and thus lacked conviction. By lunchtime doubt had crept in, and old hands knew that reversals don’t happen so easily. The indices began to lose altitude.

The NYSE was one of the last financial exchanges to go electronic, but in true American anachronistic form, the opening and closing rotations are still conducted by designated market makers – humans. So as not to cause chaos at the final bell, the NYSE publishes the dollar amount of the balance of buy- and sell-on-close orders during the last hour of trade.

A typical session will see half a billion one way or the other. A summer session usually less. When the balance began building to the sell-side last night, to the tune of 1.5 billion, the US indices turned tail. When that figure hit 3.5 billion, the Dow turned negative, and kept falling to its 200 point loss.

The S&P500, which is what the professionals pay attention to, did not manage to rally back to the intraday high point reached on Monday night. This is a negative signal. The assumption now is that the intraday low must be retested, which is when the Dow was down 1100 points.

Or maybe not. It is a market after all.

What is interesting to note, nonetheless, is that the US ten-year bond yield shot up 14 basis points to close at 2.14%. The talk from the smart money – the bond traders – is that the global correction may not be enough to keep the Fed at bay next month, and if it is, it won’t prevent a December hike.

Commodities

The US dollar index has rebounded 0.6% to 93.97. The good news is that the Aussie lost big-time on the cross-rates on Monday, particularly the euro (See: Ansell), so it fell against the greenback despite a big fall in the US dollar index. On last night’s dollar rebound, the Aussie is down another 0.2% to US$0.7130.

Commodity prices inevitably rebounded last night after Monday night’s shellacking, and in response to the PBoC. Aluminium and copper managed 2% and zinc 1%, while the other base metals struggled to sub 1% gains.

Iron ore is unchanged at US$53.30/t.

West Texas crude bounced 3% but the US$1.24 gain still keeps it under 40 at US$39.20/bbl. Brent bounced 2% or US83c to US$43.45/bbl.

I mentioned yesterday that while gold might be a safe haven in times of market volatility, it is also the first asset to be sold to cover stock market margin calls. Gold is down US$14.80 to US$1140.30/oz.

Today

For what it’s worth, the SPI Overnight closed down 47 points or 0.9%. In times of extreme volatility, futures markets tend to go a little nuts, as was evident in yesterday’s 181 point overnight drop ahead a 136 point gain in the physical.

That said, we most likely need to go down again before we can go up again, if that makes sense.

Glenn Stevens will make a speech today, which will be interesting in the context. June quarter construction work numbers are also out, reminding us the Australian GDP result is due next week.

Today is the worst – if you look it at from the perspective of someone who has to report on every one of them – day in the reporting season, with an avalanche of reports due.

Overnight BHP Billiton ((BHP)) reported its worst profit in years, and its shares closed up 5.5% in London.

Strap yourselves in, take solace in the knowledge we’ve been here plenty of times before, and whistle a bit of Monty Python.

Rudi will appear on Sky Business' Market Moves tonight, 5.30-6pm.

 

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available in the FNArena Cockpit.  Click here. (Subscribers can access prices in the Cockpit.)

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article 3 months old

The Monday Report

By Greg Peel

Manufactured Fear

The action on Bridge Street on Friday can be divided into three distinct periods. From the open, the ASX200 fell around 60 points on the lead from Wall Street which saw the S&P500 break down out of its 2015 trading range. At midday, the flash estimate of China’s August manufacturing PMI was released.

Caixin’s number, which includes a greater proportion of small and medium enterprise businesses than Beijing’s official numbers, ha been tracking lower than the official numbers of late. Being’s July manufacturing PMI came in a 50.0, smack on the neutral point of neither growth nor contraction. Caixin’s July number was into contraction territory at 47.8.

Economists had expected the Caixin number to come in at 47.7 for August so Friday’s flash estimate of 47.1 was not encouraging, and represents a six and a half year low. On that news, the ASX200 took its second leg down, to be down over 100 points on the session.

The third period began at 3pm, when buyers re-emerged. Let’s hope for their sake they were short-covering. Ultimately the ASX200 closed down 74 points, or 1.4%.

While a drop from 47.8 to 47.1 hardly seems like the end of the world, the point is that nothing Beijing has done so far to stem the tide of slowing Chinese growth appears to be working. Global markets have become all wound up with slowing global growth fears this last month, with China the particular target of concern, so Friday’s number was simply a last straw.

There was much speculation as the week ended that Beijing would jump in on Sunday with an interest rate cut, given Sundays are the government’s preferred announcement days. But this has not transpired, possibly because only the week before Beijing pressed the shock and awe button of currency devaluation, and this strategy has not had time to play out.

It nevertheless remained for the rest of the world to respond to the Chinese PMI result in the interim.

Correction

The Shanghai index fell 4.3% on Friday. Japan’s index fell 3%. The German and French stock markets fell 3% and even the usually more subdued London market took a 2.8% hammering.

This was the global picture facing Wall Street as it opened on Friday night. There was no enormous plunge from the open, but rather the indices tracked continuously south all session as investors sold and sold and sold. High-flying momentum stocks such as tech and biotech names were, as usual, among the worst victims. Recent success story Netflix was creamed. But the blue chips copped plenty of downside as well.

It was also an options expiry day, which was never going to help. When the dust settled, the Dow was down 530 points or 3.1%. The blue chip average was down 5.8% for the week and is now down 10% from its high, technically implying a “correction”, as opposed to a pullback.

For four years Wall Street has been waiting for a correction, which typically occur every eighteen months. But the focus is on the broad market S&P500 index, which fell 3.2% on Friday night to 1970, representing 5.8% for the week, but still only 7.7% from the high.

The tech-laden Nasdaq fell 3.5% to be down 6.8% for the week and is down 10% from the high, as is the Russell 2000 small cap index.

August’s breakdown on Wall Street has been building and accelerating for some time. Chinese growth has been an element of concern all year. The Chinese stock market crash caused initial angst, but ultimately Wall Street held its range. Greece caused angst for months before supposedly being resolved, and Wall Street held its range. Fed rate rise debate has raged all year and even as September shortened in the odds, Wall Street held its range.

The tipping point was the sudden Chinese currency devaluation, which signalled to the world Beijing was even more worried than was assumed. This occurred as the second wave of selling in oil markets was underway, culminating on Friday night when WTI traded briefly under forty dollars. Just when we thought it was safe to go back in the water, the Greeks are again going to the polls.

Friday’s Chinese PMI, as noted, was imply the straw that broke the camel.

Is it the capitulation trade? Does the S&P500 need to see the full 10% before this can be called? While having shifted swiftly to the sidelines on Friday night, into cash, safe currency havens like the yen and Swiss franc, and gold, traders were assuming Beijing would act over the weekend. This did not happen. There may be disappointment on Wall Street tonight.

Volatility

The VIX volatility index on the S&P500 started last week at around 12, where it’s been all year. On Friday night alone it jumped 46%, well into fear territory at 28.

Stock market outflows did not turn up in US bonds, as indicated by the US ten-year yield falling only 3 basis points to 2.05%. It went into cash, suggesting a shift to the sidelines to see what happens next. Many a trader has been pleading for a correction for the past couple of years so they can buy again at more realistic prices. Will they now buy?

The US dollar index fell a full percent to 94.80. The greenback has been the high flyer of late among the world’s largest trading currencies, so it now has the furthest to fall. The yen and Swiss franc are considered safe havens, and even the euro is a safer bet at present, with the Fed presumably still eyeing a rate rise. Will the stock market correction take September off the table?

These are the questions to which right now there are no obvious answers. On such uncertainty, stock markets are more likely to keep falling than stage a rebound.

Commodities

While commodity prices have been hit hard of late, they have already been weak for some time, unlike stock markets. Thus the panic seen across global stock markets on Friday was not matched in commodity prices.

They were nevertheless weaker, with copper down 0.5%, aluminium and nickel down 1.5% and tin and zinc down over 2.5%, albeit iron ore is steady at US$55.60/t.

Having traded briefly under forty, West Texas crude closed down US64c to US$40.27/bbl. Brent fell US84c to US$45.33/bbl.

Safe haven gold rose US$8.10 to US$1160.40/oz.

In isolation, the Aussie should have copped a hammering as China’s safe proxy currency, but a fall of only 0.3% to US$0.7319 reflects the big drop in the greenback.

By rights, Australia saw its China PMI reactions trade on Friday. But we only fell 1.4%. The rest of the world fell 3%. For a long time technical analysts have been targeting 5100 as the bottom of an ASX200 correction, were the index to break out of its range to the downside. That’s another 114 points down.

The SPI Overnight closed down 110 points or 2.1% on Saturday morning.

The Week Ahead

It’s going to be one of those weeks in which anything can happen and probably will.

It’s still three weeks to go to the Fed’s September meeting. Sometime next month Greece will go back to the polls, and it may be another month before a government is formed given no party will win a majority. In the meantime we shall have to wait to see whether Beijing simply sweats on its currency devaluation move as being the cannon required, or will panic and add further stimulus to the mix.

Is the Fed still data-dependent, or have things changed? This week sees the release of the Chicago Fed national activity index and flash manufacturing PMI tonight, new home sales, house prices, monthly consumer confidence and the Richmond Fed activity index on Tuesday, and durable goods and a flash services PMI on Wednesday.

On Thursday it’s pending home sales, along with the first revision of US June quarter GDP, while Friday brings personal income & spending and fortnightly consumer sentiment.

This week the countdown begins for Australia’s June quarter GDP result, due next week. On Wednesday we’ll see June quarter construction work done and on Thursday private sector capex.

This week is the final, and by far the most crowded, week of the local reporting season. It’s not shaping up as a great week for the micro stories to dominate given such a macro storm cloud. There are far too many stocks reporting this week to choose highlights. Please refer to the FNArena Calendar (link below).

Rudi will appear on Sky Business on Wednesday at 5.30pm.
 

For further global economic release dates and local company events please refer to the FNArena Calendar.

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article 3 months old

Next Week At A Glance

For a more comprehensive preview of next week's events, please refer to "The Monday Report", published each Monday morning. For all economic data release dates, ex-div dates and times and other relevant information, please refer to the FNArena Calendar.


By Greg Peel

Last night’s break down from the S&P500’s year-long trading range is potentially a bit of a game changer as Fed confusion continues to rage. The question now is will this prove but a fleeting blip, or is the long overdue Wall Street correction now potentially underway?

In terms of a supposedly data-dependent Fed, there’s plenty of releases to consume next week in the US. They include new and pending home sales, house prices, consumer confidence, durable goods, personal income & spending and the Richmond Fed activity index, along with the first revision of June quarter GDP.

Monday sees flash August manufacturing PMIs from China (Caixin), Japan, the eurozone and US.

Japan will release inflation, retail sales and unemployment data at week’s end.

In Australia, the countdown to the following week’s June quarter GDP result begins next week with construction work done and private sector capex numbers.

It is also the final, and by far the most crowded, week of the local result season. Please refer to the FNArena Calendar (link above).
 

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article 3 months old

The Overnight Report: Buyers Evaporate

By Greg Peel

The Dow fell 368 points or 2.1% while the S&P lost 2.1% to 2035 and the Nasdaq dropped 2.8%.

Alexis Tsipras has resigned as Greek prime minister and dissolved the government ahead of a fresh election next month. Oh God, here we go again.

The Bad Oil

Stop the world, I want to get off.

While it’s frustrating enough that the local market should fall 1.7% yesterday, it’s more frustrating that we were up so solidly on Wednesday. Clearly, no one has a clue at the moment. On Wednesday the market was led up by a strong snap-back rally in the energy sector, which appears to have been triggered by Woodside maintaining an 80% payout ratio when there were concerns this would be reduced.

But 80% of what? In another six months that yield will be worth tuppence ha’penny. One might have argued on Wednesday that energy stocks had reached oversold levels, but that opinion looked a bit foolish yesterday. From yesterday’s opening bell, the energy sector led the ASX200 lower. By lunchtime, energy was still the stand-out on a 4% plunge, while other sectors were weaker but by a much lesser magnitude.

By the afternoon, energy just kept falling and the session morphed into a general sell-a-thon. Materials copped 2%, to be the next worst behind energy’s 5.8% capitulation. The banks had been sold off on Tuesday afternoon, bought right back on Wednesday morning, and held reasonably steady yesterday morning until being sold down 1.7% by the close.

What changed in bank land between Tuesday and yesterday?

The end result is a clear breach of support at 5350, the last stop, technical analysts attest, before 5100. Next month is September, traditionally the worst month of any year and this time around, possibly including the first Fed rate rise, so that 5100 level is not looking overly pessimistic.

The good news, from a technical perspective, is that after the low is locked in at 5100 the pullback will be complete, and the next target is 5800. Just as well it’s that simple.

Going, Going…

After two days of selling, Wall Street had been building up to something more substantial. The falling oil price was driving it home, Fed confusion only adds to the uncertainty, and last week’s renminbi devaluations have heightened fears China is actually slowing much faster than the data indicate.

Emerging markets, in general, have become a major issue. A slowing China means pressure on the economies of all of China’s Asian neighbours. Plunging oil prices threaten to bring down the economies of oil-exporting nations such as Brazil and Russia. Saudi Arabia needs US$90/bbl oil to break even on its government spending commitments. Venezuela needs US$140/bbl – good luck with that. All other exporters lie along that curve between the two.

Lower oil prices should, in theory, provide a welcome boost to oil-importing economies. But two obvious examples are China and Japan. China’s GDP growth is slowing rapidly, and Japan’s was negative in the June quarter. Only Europe seems to be holding its own, but only just.

Then the fear is the Fed raises its rate next month, or even in December, and the resultant jump in the US dollar sends commodity prices lower still and, possibly, creates another Asian currency crisis. There is much concern now amongst US banks over the amount they have lent to small US shale oil producers who are now either under or close to being underwater. If one throws in the towel, hold on for the rush.

And to top things off, the Chinese stock market closed down 3.5% yesterday (most of which occurred after the close on Bridge Street) and now Greece threatens to throw Europe into turmoil all over again.

Cue Satchmo: And I think to myself…

The S&P500 broke down sharply through its 200-day moving average at 2078 early in last night’s session and this time, the buyers did not appear. There had been just too much pressure building. The next stop was 2044 which is the bottom of the trading range the S&P has been stuck in basically all of 2015. For a little while late in the session, that level held, but as the sell-on-close orders mounted, Wall Street breached the bottom of the range.

The S&P closed at 2035. It all sounds very frightening, but actually that’s only 4% from the peak. Commentators have been banging on for ages now that Wall Street is well overdue a 10% correction. The popular suggestion is that the Fed will trigger this. Now that we’re outside the range, it’s a new ball game. Wall Street is down for the year. The Dow closed below 17,000.

Commodities

What is the winner in all of this? Gold. It rose US$18.20 last night to US$1152.30/oz, aided by a 0.7% drop in the US dollar index to 95.74, and talk is now of the very familiar 1200 level been reached once more.

The oils fell again last night, although not so dramatically. West Texas has rolled over into the October delivery contract and in so doing won a reprieve on the curve as far as 40-breach fears are concerned, but a US36c fall last night still has WTI dangling at US$40.91/bbl.

Brent fell US70c to US$46.17/bbl.

Base metals fared a little better, thanks to the fall in the greenback. After a week of selling, copper rebounded 1.7%. Aluminium and zinc regained a percent but nickel and tin went the other way.

Iron ore fell US30c to US$55.60/t.

Falling commodity prices and Chinese slowing fears mean the Aussie is not blindly running in converse to the greenback, as it is down 0.2% at US$0.7337.

Today

The SPI Overnight closed down 66 points or 1.3%.

Reporting season highlights today include Coca-Cola Amatil ((CCL)), Insurance Australia Group ((IAG)) and Santos ((STO)).
 

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available in the FNArena Cockpit.  Click here. (Subscribers can access prices in the Cockpit.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's - see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

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article 3 months old

The Monday Report

By Greg Peel

Oil Worries

It was the energy sector that took the big hit on the ASX on Friday, driven down by falling oil prices and the belief West Texas crude may be poised to fall into the thirties, thus revisiting GFC lows.

Energy fell 3.7%, and next worst performer on the day was materials with a 1% fall. The banks also fell 0.5% to round out a tough couple of weeks since the ANZ capital raising announcement. Commonwealth Bank ((CBA)) is also raising capital, and will come out of its trading halt this morning.

To add insult to the injury of bank sector woes, the Australian market in general copped an additional beating last week thanks to the sudden and poorly explained Chinese currency devaluation. Beijing has been at pains ever since to insist the devaluation is not about boosting China’s flagging export economy via currency wars but about moving the renminbi towards a marker-based pricing mechanism, as the IMF has entreated the Chinese to do so.

Fair enough, but the timing is certainly interesting. And while the last thing we need is for Beijing to begin disclosing possible policy moves a year ahead, a la the Fed, so we can all die of frustration debating the issue for the months and months preceding, it would be nice if Beijing at least made their explanations at the time of the event, rather than in a scramble a day or two later.

The local index attempted to stabilise after a torrid week on Friday morning, but was unable to hold out. When the ASX200 broke support at 5380, the technical sellers poured in in the afternoon.

As You Were

Australia has felt the pain but the US stock market did manage to recover ground last week after the initial renminbi volatility spike. Wall Street remains very much stuck in its 2015 range, and will no doubt remain stuck at least until the September Fed meeting.

On that note, Friday night featured a 0.6% rise in July US industrial production when 0.4% was forecast. The previous two months’ numbers were also revised upwards. The US producer price index rose a muted 0.2% in July after having risen 0.4% in June. The impact of lower oil prices is clearly evident in the annual headline PPI rate of minus 0.8% against the annual core rate, ex food & energy, of plus 0.9%.

Friday’s data sufficiently offset each other to provide no fodder for either side of the Fed timing debate, and no real impetus for Wall Street. It was only the news from Europe that provided a little boost as the week came to a close.

The Dow closed up 69 points or 0.4%, the S&P gained 0.4% to 2091 and the Nasdaq added 0.3%.

You might remember Greece? Well on Friday night the eurozone signed the deal that will see Greece receive E86bn over the next three years in bailout package number three. Packages number four, five, six and so on remain pending. As to whether this is enough to save Greece from economic disintegration in the meantime remains to be seen.

The deal’s approval was more of a rubber stamp than a source of great market relief but at least Greece might slip out of the news now for a while. The approval also managed to soften the blow from the eurozone’s June quarter GDP result, which showed an easing to 0.3% quarter on quarter growth following March’s 0.4%, for an annualised growth rate of 1.3%. Germany’s growth rate improved but not by as much as hoped, while France’s economy stagnated once more.

The best we can say of Mario Draghi’s QE package at this stage is that it has stopped the rot, and brought stability to the European economy if not raging growth. Of course, China’s currency devaluation is not going help an economy dependent on exports.

Commodities

It was a mixed bag on the LME on Friday night, with lead up around a percent, nickel a percent and a half and tin two and a half but aluminium, copper and zinc all fell asleep.

Iron ore remained unchanged at US$56.20/t.

The oils found some stability, having fallen 20% in a month and looking dangerous. West Texas was down slightly at US$42.13/bbl and Brent was down slightly at US$49.03/bbl.

Gold was steady at US$1113.70/oz as the US dollar index rose a tad to 96.52.

The Aussie is up 0.3% at US$0.7379.

The SPI Overnight closed up 9 points on Saturday morning.

The Week Ahead

US inflation – the weakness of which is the main reason supporting the “not in 2015” side of the Fed rate rise argument – will be in the frame again this week with the release of the US CPI on Wednesday.

The US will also see housing sentiment and the Empire State activity index tonight, housing starts on Tuesday, and existing home sales, leading economic indicators and the Philadelphia Fed activity index on Thursday. Wednesday also sees the release of the minutes of the last Fed meeting but any specific clues are unlikely.

The release of the minutes of the August RBA meeting is the only real economic highlight for Australia this week. Given the meeting pre-dated the Chinese currency revaluation, the minutes will not be of any great value.

Instead, the Australian market will be heavily focused on corporate earnings this week, as the gentle trickle of reports to date turns into a barrage.

Today’s highlights include Aurizon ((AZJ)), Charter Hall ((CHC)) and Newcrest Mining ((NCM)).

And a reminder that CBA recommences trading today following its announced 10% discounted rights issue.

Rudi will appear on Sky Business on Wednesday at 5.30pm.
 

For further global economic release dates and local company events please refer to the FNArena Calendar.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

article 3 months old

Next Week At A Glance

For a more comprehensive preview of next week's events, please refer to "The Monday Report", published each Monday morning. For all economic data release dates, ex-div dates and times and other relevant information, please refer to the FNArena Calendar.


By Greg Peel

Chinese currency policy will no doubt continue to reverberate next week but things should settle down a bit as markets digest the ramifications. In a week largely devoid of Australian economic data the release of the minutes of the August RBA meeting would be a highlight, but for the fact the renminbi devaluation renders them effectively outdated.

Of more interest will be the minutes of the last Fed meeting, although once again this week’s PBoC actions will cast doubt on whatever one might glean from the subtleties of Fedspeak with regard a September rate rise.

US data next week include the Empire State and Philly Fed activity indices, housing sentiment, starts and existing home sales, and the CPI.

The eurozone will post its first estimate of June quarter GDP tonight and Japan will follow suit on Monday.

But barring any further left-of-field developments, the focus for the Australian market next week will be on earnings reports, the flow of which shifts into top gear for the next two weeks. There are far too many stocks reporting to highlight any number, so please refer to the FNArena calendar (link above).
 

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