Tag Archives: Europe & UK

article 3 months old

The Monday Report

By Greg Peel

Turbulence

Friday’s sell-off on Bridge Street represented a new element in the macro picture, that of China. But between China and Greece, developments over the weekend cloud the issue of what happens now.

The Shanghai index began to tip over early in June and its correction has featured some solid down-days, including at least one 6% fall. While such moves have sparked nervousness and much debate, the general feeling was that a stock market that had doubled since only late last year was clearly due a correction, and thus the odd big fall should not necessarily suggest it’s time to panic.

That the ASX200 was last week pushing back up to the 5700 mark even as China’s stock market remained brittle is testament that no one was all that worried at the time. However late on Thursday in China’s session, the Shanghai index started diving and ended the day down 4%. On Friday it fell 7.4% as it approached the 20% correction mark. A 20% correction is said to signify a bear market.

This is a load of unsubstantiated rubbish of course, but enough to encourage some precursory selling in the Western world’s proxy for Chinese investment – the Australian stock market. Friday saw a 2.8% fall for the materials sector and 3.2% for energy, with industrials also copping a 2.8% beating. Rumours of private equity interest meant Woolworths had endured enough punishment, for now, hence consumer staples bucked the trend with a 0.6% gain.

And bizarrely, yet again, the sector that should be the least volatile was the most, with utilities falling 4% (including stocks going ex-div). Perhaps the market sees Chinese investors as the only supporters of Australian commercial property.

Whatever the case, yesterday the PBoC cut interest rates by 25 basis points for the fourth time since November. The borrowing rate falls to 4.85% and the deposit rate to 2.0%. The central bank also cut the reserve ratio requirement (RRR) by another 50 basis points for banks serving rural areas, agriculture and small business.

How these cuts impact on the Chinese stock market will become apparent later today when the Shanghai exchange opens.

Fat Lady Warms Up

On Saturday night, negotiations between Greece and its lenders again broke down as the Greek government left the table. Prime Minister Tsipras thus decided it was time to readdress his anti-austerity mandate by putting the question to his people. He called a referendum for this coming Sunday which will basically be a question of do we maintain the rage, and risk a Grexit, or do we bow to the creditors.

If he thought the creditors were going to sit back and wait for the result, and supply interim funding in the meantime, he was dead wrong.  An angry European Commission has insisted there will be no bail-out extension beyond Tuesday night’s expiry. An angry IMF has insisted there will be no extension for repayment of the E1.6bn due on Tuesday -- money Greece does not have.

On Saturday the people of Greece were queuing up to get what they could of their money out of ATMs. Yesterday those machines were running out of cash. In the wake of the weekend’s breakdown in negotiations, the ECB has refused to extend any further emergency funding to Greek banks. Tsipras has ordered the banks be closed tonight, and the stock market, in what is no doubt a precursor to currency controls.

Default looms on Tuesday night. EU representatives will continue to hold meetings during the week, but this time it won’t be about compromise, it is assumed. This time it will be about planning the Grexit.

Wall Street

In Friday night’s session Wall Street was still in watch and wait mode regarding Greece. Tonight’s action will determine the response to the weekend’s developments.

The Dow closed up 56 points or 0.3% but the gain was almost entirely attributable to one stock – Nike – following a very positive earnings report and a 4% share price jump. Otherwise, the S&P was flat at 2101 and the Nasdaq fell 0.6%.

The economic data release of the day was the fortnightly Michigan Uni consumer sentiment survey, which showed a rise to its highest level in five months, beating forecasts. While this news provided some support, no one was prepared to take on risk over the weekend. And the slide in the Shanghai index did not go unnoticed.

The US bond market was nevertheless prepared to be more introspective, focusing on the ongoing stream of pretty solid US data. The US ten-year yield rose 8 basis points to 2.48% to mark its highest close since last September. The market is still very long US bonds and a Fed rate rise looms ever nearer, but it will be interesting to see what happens in global bond markets this week.

The US dollar index rose 0.2% to 95.40.

Commodities

The Aussie dollar took a beating on Friday, in line with the local stock market. It was down 1% to US$0.7658 on Saturday morning and is lower still, at US$0.7613 in early trade this morning.

All round uncertainty led to a mixed session on the LME on Friday night and again, we must remember that the Greek breakdown and Chinese rate cut have occurred in the interim. Copper and tin rose half a percent and zinc fell half a percent, while aluminium and lead fell one percent and nickel fell two percent.

Iron ore fell US60c to US$60.70/t, closing the week exactly where it started.

The oil markets were deathly quiet on Friday night. West Texas was little changed at US$59.65/bbl and Brent down just a tad to US$63.17/bbl.

Gold was little changed at US$1174.20/oz.

On Saturday morning, before the weekend’s developments, the SPI Overnight closed up 10 points.

The Week Ahead

World markets are this morning suffering from vu-deja – that eerie feeling that nothing like this has ever happened before. As late as Saturday morning, the prevailing belief was that somehow, in some way, Europe would manage to once again kick the Greek can down the road. That expression is getting pretty tiresome, but I haven’t yet come up with another one.

But right now it is hard to see past at least a Greek default. Sunday’s Greek referendum seems irrelevant in that context, but were the Greek people to vote heavily in favour of capitulation, then perhaps the EU will be able to sort something out with regard remaining in the eurozone.

Meanwhile, all Asian region eyes will be on the Shanghai stock market today to see whether yesterday’s rate cuts are enough to stabilise the tumbling index.

The world will revolve regardless, and this week features some rather important data releases.

Tomorrow is the end of financial year in Australia, and the end of quarter anywhere else. Wednesday is the first of the month, and thus features global manufacturing PMI releases. Beijing now releases both its manufacturing and service sector PMIs on the first of the month, while HSBC still spreads its results two days apart. Friday sees the global round of service sector PMIs.

It’s a short week in the US, with markets closed on Friday for the Fourth of July long weekend. It’s also the first week of the month, which means jobs numbers. The ADP private sector number will be released on the Wednesday as usual, but the non-farm payrolls report is this month brought forward to the Thursday.

Other US releases include pending home sales tonight, and Case-Shiller house prices, Conference Board consumer confidence and the Chicago PMI on Tuesday. Wednesday it’s construction spending and vehicle sales, and Thursday factory orders.

A flash estimate of eurozone CPI is out tomorrow night, which will at least give us a guide to how the rest of the zone is faring.

Australia sees new home sales and private sector credit tomorrow, and the RBA governor will deliver a speech in London. On Wednesday it’s the manufacturing PMI, building approvals, house prices and the TD Securities inflation gauge. Thursday it’s the trade balance, and Friday sees retail sales and the services PMI.

Pass the ouzo.

Rudi will appear on Sky Business on Wednesday at 5.30pm and later on the same day, 8-9pm, to host Your Money, Your Call Equities. On Thursday he'll appear at noon and again between 7-8pm for the Switzer Report.
 

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

The fate of Greece will be decided at a meeting tomorrow night, we’re led to believe, although that fate may yet be an extension to negotiations. The IMF nevertheless seems pretty intent that Greece will be in arrears if it does make good on its repayment on Tuesday. Arrears is not default, just a step towards it.

Meanwhile it appears the Australian market is crashing in anticipation, although I doubt Greece has much to do with such end of financial year volatility.

It’s a busy week around the globe next week, Greece notwithstanding, and includes a short week in the US given the Fourth of July long weekend. Being the first week of the month we will, as usual, see global PMIs and US jobs numbers.

Wednesday sees manufacturing PMIs from Australia, Japan, China (HSBC), the eurozone, UK and US, and the official Chinese manufacturing and service sector PMIs from Beijing. On Friday everyone repeats with their own service sector numbers except the US, where markets will be closed.

Economic releases in the US next week include pending home sales, Case-Shiller house prices, the Chicago PMI, consumer confidence, vehicle sales, construction spending and factory orders. The ADP private sector jobs report is out on the Wednesday as usual but the non-farm payrolls numbers will be brought forward to Thursday due to the holiday.

With Greece in the balance, the eurozone will see a flash estimate of June CPI next week.

The RBA governor will speak on Tuesday ahead of the usual first of the month PMI, house price index and TD Securities monthly inflation gauge, along with building approvals. The services PMI on Friday wraps up Australia’s economic week.

Tuesday is end of financial year, and as we can probably gauge from today’s activity on the ASX, we may yet see more volatility.
 

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article 3 months old

The Overnight Report: Hey Big Spender

By Greg Peel

The Dow closed down 75 points or 0.4% while the S&P lost 0.3% and the Nasdaq fell 0.2%.

Volatility

We might argue that yesterday’s one percent drop in the ASX200, largely consistent across sectors, was all about the realisation that assumptions of a Greek resolution being close were way off the mark. Greece is possibly why we opened lower form the bell, but right now trading is being complicated by time-of-the-year factors.

First of all there is the potential for tax-loss selling, where investors look to realise losses on stock positions to provide income or capital gains tax relief as the financial year closes, potentially ahead of re-establishing positions in the new year. Countering this pressure is the fact end-of-year also means end-of-quarter, at which time funds managers usually look to push markets higher to “window dress” their quarterly returns. We may yet see this occurring early next week.

The fact that the selling accelerated towards the close yesterday would point a finger at yesterday’s June quarter stock option expiry. A week earlier we saw a big, seemingly out of place sell-off on index option expiry day, which was subsequently followed by a complete reversal the next day. If we look at the materials sector, for example, it fell 1% despite a sudden 2% pop in the iron ore price, which would normally fire up the buyers. Every index fund holds the big boys, BHP and Rio, and those names thus generate a lot of options activity.

Technically, if we ignore last Thursday’s index expiry anomaly the ASX200 rallied hard from 5500 to 5700 in the space of two weeks without pausing for thought at 5600, so it may be that we need to fall back to 5600 to consolidate before the next move.

The bottom line is that until we get to Wednesday, fundamentals and the macro picture will potentially be obscured, unless their influence is particularly significant. See, for example, Greece.

Clock Ticking

They’re still holding meetings over in Brussels and still getting nowhere. Pensions, and other elements of reform remain the stumbling blocks and it appears Tsipras has reached his line in the sand and is sticking to it. This leaves Germany with a dilemma.

If the creditors concede to Greece’s unmoved pension age then Greece will be allowed to retain a lower pension age than any other country in the eurozone, despite, currently, being the root of all the zone’s problems. This would not go down well with the German populace, who must hold out to 65.

One can also assume the German populace would have kicked Greece out years ago, being, as taxpayers, a major funder of Greek handouts. But the German powers that be are desperate to keep Greece in the eurozone, despite possible domestic denouncement. Aside from the whole “One Europe” concept being a German idea in the first place, way back when, the biggest economy in the bloc needs the weaker economies to remain as constituents to provide a counterbalance in order to keep the common currency grounded.

The trade-off is thus one of just how much money the Germans have to keep forking out, into the unknown future, to ensure the competitiveness of their export-based economy.

Talk now is of “final” meetings being held over the weekend (we’ll believe “final” when we see it) at which point something must happen one way or the other. Greece’s IMF repayment is due on Tuesday.

Buying Spree

US consumer spending leapt 0.9% in May – the biggest jump since April 2009. Cars were the big ticket item, and higher oil prices also impacted the dollar figures. But while oil prices are now higher than a couple of months ago, they’re still a lot lower than a year ago, and hence economists have been predicting such a boost to consumer spending for some time.

Oil prices aside, incomes jumped 0.5% in May, having posted the same gain in April, to mark the best two months in about eighteen.

Which means Wall Street is back to worrying about the Fed again. Consumer spending has, to date, been a missing piece of the puzzle, but as the June quarter shows a trend of increasing spending and incomes, in contrast to the weak March quarter, an assumed flow-on to jobs and inflation puts the ball firmly back in the September rate hike court.

Thus the US stock indices were lower last night, rather than higher as one might expect from solid spending numbers in the world’s biggest consumer economy.

The US ten-year bond yield rose 2 basis points to 2.39%.

The US dollar index nevertheless slipped 0.1% to 95.18, when one might otherwise have expected a gain. But global currencies have gone relatively quiet this week as all eyes turn to Brussels.

The Aussie’s been bouncing around a bit, and is up 0.4% to US$0.7739 this morning, but it hasn’t really been going anywhere lately either.

Commodities

It’s also a watch and wait mood at present on the LME. Aside from a 2.6% drop in tin last night, base metal prices were again mixed on small moves and low volumes.

Iron ore has fallen back US40c to US$61.30/t.

Gold is off a little at US$1172.90/oz.

Greece is also a consideration for oil markets, but it so happens that the June 30 deadline for Greece’s IMF repayment is also a deadline for Iranian nuclear negotiations. While that battle, too, looks like having reached an impasse and may yet drag on, the bottom line is that if Western sanctions are lifted, Iranian oil exports will flow freely once more.

Last night West Texas fell US58c to US$59.64/bbl and Brent fell US31c to US$63.28/bbl.

Today

The SPI Overnight closed down 6 points.

By rights it should be another soggy day on Bridge Street given uncertainty and offshore leads, but as noted above, at this time of the year anything can happen.

What we do know is that there is suddenly a large number of stocks going ex-div today, and all of them are property or infrastructure names. These are your classic “yield stocks”, meaning they pay sizeable dividends. So from the open there will be a mathematical downward adjustment to the ASX200.
 

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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: Deal Or No Deal?

By Greg Peel

The Dow closed down 178 points or 1.0% while the S&P lost 0.7% and the Nasdaq lost 0.7%.

Flat

A very lacklustre day on Bridge Street yesterday saw the ASX200 struggle over 5700 without great conviction before falling back to be little changed on the session. The telco gained some support, rising 0.9% as consumer discretionary copped a 1% sell-off, but elsewhere sector moves were mixed and negligible.

It would appear that we’ve reached another “where to now?” level having rebounded a couple of hundred points in the ASX200 following the 500 point fall from this year’s post-GFC high. Continuing to buy yield is a risky business as Fed rate rise talk heats up and right now, Greece is a watch and wait situation.

There are only four sessions left in FY15 which should imply some last minute argy-bargy, tax-loss selling, window dressing, and general volatility but we certainly didn’t see any of that yesterday.

Deflated

The enthusiasm generated early this week by a belief the Greek drama was about to come to a happy ending always seemed a little premature, given the response from the creditors to Tsipras’ latest concessions was one of “a step in the right direction” rather than “we’ve reached agreement”. This implied further concessions were still required, and Tsipras has already risked the rejection of the Greek parliament in bowing to creditor demands in any way, shape or form.

The latest eurozone finance ministers’ meeting broke up last night without resolution, and door-stop comments from ministers as they left the meeting were more indicative of ongoing stalemate than any progress having been made. The Austrian, Finnish and even Spanish (people in glass houses?) ministers all suggested Greece had not brought them anything new.

One would have to think Greece is at this stage moving closer to default than to receiving its bail-out funds. The risk for Greece is that a Grexit would prove more devastating to the Greek economy in the short term than the austerity the country is already suffering from. The risk for the creditors is that if they offer concessions to Greece, every subsequent eurozone member general election will install a left wing anti-austerity party which will queue up to receive the same treatment.

Notwithstanding the risk that continuing to support Greece will mean pouring money into a black hole for most of eternity, and having more of these tiresome bail-out negotiations every time.

But the biggest risk for the eurozone is that Greece exits, suffers near term hardship, yet thanks to a much devalued drachma is able to quickly rebuild a viable economy, free of lingering debt burdens thanks to IMF loan and sovereign bond default. That would signal the beginning of the end for the (failed?) experiment.

Jitters

The US March quarter GDP result was last night revised to minus 0.2% growth from a prior minus 0.7%. No one blinked because (a), the number matched forecasts and (b), it’s history. On Wednesday we’re into the September quarter.

It was a soggy day on Wall Street largely as the Greek news filtered out, but also because billionaire investor Carl Icahn appeared on CNBC as a “public service” to tell retail investors US stock markets were becoming overheated. No one is sure which company’s shares he’s looking to buy, but he did manage to get the Dow down 1%.

Icahn did say, nonetheless, that he still liked Apple, of which he owns a decent slice, and so Apple was the only Dow stock to finish in the green on the day. It’s not known whether Icahn was taking profits.

Granted, the Nasdaq and Russell have hit new all-time highs but the S&P500 has not moved since March. If Wall Street is overheated now, it must have been overheated then.

The US ten-year bond yield fell back 4 basis points to 2.37% last night as Greek risk heightened again and the US dollar index came off 0.2% to 95.28.

Commodities

Copper was the only base metal to post a positive move on the LME last night as all others fell. No move exceeded 1%, but Greek concerns were cited.

Iron ore suddenly decided to jump US$1.20 to US$61.70/t.

Gold is US$3.50 lower at US$1174.80/oz.

The weekly US inventory report, released last night, showed an unexpected rise in both crude production and gasoline supply. West Texas fell US86c to US$60.22/bbl and Brent fell US88c to US$63.59/bbl.

The Aussie is down 0.4% to US$0.7706.

Today

The SPI Overnight closed down 9 points.

Greek negotiations continue tonight.

Today is stock options expiry day on the ASX. This may spark some individual stock volatility, but stock options are nowhere near as widely held as index options, which expired last week and caused a lot of volatility.

Rudi will appear on Sky Business' Lunch Money, noon-12.45pm.
 

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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)

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: No Fat Lady Yet

By Greg Peel

The Dow closed up 24 points or 0.1% while the S&P gained a point to 2124 and the Nasdaq rose 0.1%.

Step-Jump

It was not a very good day for day-traders yesterday on Bridge Street, which seems strange given the ASX200 closed up 74 points. But the 74 points was basically achieved on the opening rotation – the first half hour of trade – and the index wavered little from that level all the way to the closing bell.

Healthcare stood out with a 2% gain, while beleaguered consumer staples stood out with only a 0.4% gain, when all other sectors posted near to or above 1% positive moves. It was another “Buy Australia” session, likely replicating similar Greek-relief responses in trading around the globe, despite the fact the Australian market never really fell on Greece fears in the first place.

HSBC’s flash estimate of China’s June manufacturing PMI came out mid-session and had little impact on a market that had already made its trade for the day. The result could be interpreted as either good or bad. It was good, because the number rose to 49.6 from 49.2 in May, or it was bad because 49.6 means China’s manufacturing sector is still contracting, just at a slightly slower pace.

Japan was disappointed with its own manufacturing estimate, showing a dip into contraction at 49.9, down from 50.9.

Not Over Yet

European stock markets remained in a positive mood last night after Monday night’s big surges. The German index was up 0.7% and the French index up 1.1%. The Greek index, for what it’s worth, was up 6% last night following Monday night’s 9% gain. Everyone seems to be assuming a done deal.

Yet Angela Merkel did not seem particularly convinced when she was interviewed post Monday night’s developments, and on the other side of the coin, many left wing members of Greece’s parliament were downright angry. The Tsipras government is confident the Greek parliament will pass the new concessionary deal, but that appears far from certain, and indeed that concessionary deal is not yet bedded down.

Tsipras will meet again with the eurozone finance ministers tonight, and presumably the ministers will suggest that a deal is close, but we just need a few more austerity tweaks. The whole thing could yet again end in stalemate.

Even if a deal is reached, all that will be achieved is a staving off of the inevitable further into time, and a lingering source of future potential volatility.

Joseph Heller once satirised US post-depression subsidies for farmers, such that they were paid not to grow alfalfa. The more alfalfa they didn’t grow, the more they were paid. Tsipras intends to increase taxes on Greece’s rich. The more they are taxed, the more they can avoid.

The good news out of the eurozone last night, beyond the peripheral farce, was that the eurozone manufacturing PMI has reached a four-year high, according to last night’s flash estimate for June. It suggested a rise to 54.1 from 53.6. ECB stimulus, and a resultant weak euro, seem to be having the right effect.

Double Trouble

Over in the US, the day’s economic data releases were mixed.

A flash estimate of the US manufacturing PMI suggested a fall from 54.0 in May to a four-year low 53.4 in June. New durable goods orders fell a headline 1.8% in May, compared to 1.5% expectations, but stripping out lumpy aircraft orders left a 0.4% gain. New single-family home sales rose to a seasonally adjusted pace of 546,000 in May, compared to 525,000 expectations, to mark the fastest pace since February 2008. But this series is notoriously volatile.

There was no glaringly obvious trend in last night’s US data, yet it was still left to the Fed to cause ructions in the market.

Earlier in the month, the Fed’s policy statement and Fed chair Janet Yellen’s press conference gave markets the impression a September rate rise was now less likely than feared, and perhaps December would see lift-off. Last night Fed governor Jerome Powell suggested that it is possible there will be rate hikes in both September and December.

September is still a “coin toss” at this stage, he admitted, but assuming the jobs numbers continue their positive trend and inflation continues to tick up towards the Fed’s 2% target, then September is a goer. Powell also noted that critical to a September decision is the fact the US stock market is not in a bubble.

Last night the Nasdaq, small cap index and mid-cap index all hit new all-time highs. But the S&P500 and Dow are still just under, and indeed, to Powell’s point, Wall Street has not really gone anywhere much all year.

The Dow was up 70 points from the open last night, following Europe’s lead, but Powell’s comments took the wind out of the sails. Not that his two-hike view is a shock, and indeed it matches the view of many in the market.

But it was enough to send the US ten-year yield up another 5 basis points to 2.41%, and the US dollar index surging up 1.2% to 95.47.

Commodities

Such a jump in the greenback would usually spell trouble for commodity prices but last night’s trade on the LME was the first chance to respond to the news from Greece regarding a possible deal. Aluminium and zinc rose 1%, copper and lead rose 2%, and nickel jumped 3%.

Iron ore fell another US10c to US$60.50/t.

The oils were also stronger, despite the dollar. West Texas rose US84c to US$61.08/bbl and Brent rose US$1.14 to US$64.47/bbl.

The US Defense Secretary was in Estonia last night signing a deal that will see US military hardware and forces deployed in the country as a counter to Russian imperialism. This reminded oil markets that outside of Greece there is a cold war going on, resulting in sanctions against major oil and gas producer Russia.

The Aussie saw no relief from the US dollar surge either, and is steady at US$0.7733.

Today

The SPI Overnight closed up one point.

It’s a watch and wait story now on the Greek front.

Tonight will see the final revision of the US March quarter GDP result ahead of next month’s first estimate for the June quarter. Economists expect the minus 0.7% shock of the last revision to be improved to minus 0.2%. But it’s now ancient history.

Rudi will appear on Sky Business' Market Moves, 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.)

(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: Breakthrough

By Greg Peel

The Dow closed up 103 points or 0.6% while the S&P gained 0.6% to 2022 and the Nasdaq rose 0.7%.

Poised

The ASX200 stumbled its way quietly into the green and across the 5600 line yesterday on relatively muted trade following Friday’s big rally. With the Greek issue hanging thick in the air, investors were drawn to Australian yield stocks and away from cyclicals in a mixed bag of sector moves.

Utilities posted the biggest gain followed by the telco, with financials posting decent gains despite the drag from rumour-hit IOOF. Materials, energy, industrials and healthcare all closed in the red, as did a consumer staples sector which continues to be dragged down by Woolworths and talk of another German invasion.

Concession

No doubt spooked by the ever increasing flow of money out of Greece’s banks, Greek prime minister Alexis Tsipras put to Greece’s creditors over the weekend a deal which has eurozone finance ministers believing that perhaps by the end of the week, agreement could be reached. Instead of emerging from the meeting in an angry mood due to Greece’s failure to budge, as has been the case most recently, this time there was talk of a “credible and detailed” proposal.

And in a bizarre piece of theatre, the EU leaders, who had all hastily flown to Brussels for an emergency summit, sat down and discussed nothing.

They discussed nothing because there is nothing yet ready to discuss. Some eurozone ministers saw light at the end of the tunnel, given Greece had conceded to tax increases within its proposal, mostly for the wealthy. Others remain unconvinced, given there was no concession on the pension age, which has to date been a major stumbling block. But what at least emerged was small step in the right direction.

There will need to be further talks. The negotiations are expected to extend through the week as the people of Athens take turns in protesting against austerity on one day, and against a Grexit on another. Because further negotiations are required to tackle Tsipras’ detailed proposal, the EU leaders decided they would have to wait to see how it all goes.

Which suggests there was only one reason the leaders’ meeting was hastily organised to be held following the finance ministers’ meeting last night. Were the finance ministers’ meeting to yet again end in stalemate, the leaders would begin plotting the path for an orderly Grexit and containment of any fallout. Or if one wanted to be more sinister, one might suggest the leaders’ meeting was organised simply to scare Tsipras into believing Grexit discussions were indeed its sole purpose.

At a subsequent press conference, European Commission head Jean-Claude Juncker repeatedly responded to questions with a curt “that was not discussed”. Juncker suggested he trusted that a deal will be reached by week’s end. A deal will be reached, he said, because a deal must be reached.

So will the creditors meet Tsipras’ concessions with concessions of their own? One presumes this is what the prime minister is expecting. But while all might be looking promising this morning, there remains the small issue of any agreement between Greece and its creditors having to be put to the left wing majority Greek parliament, and to the sixteen parliaments of the other eurozone members. If Tsipras makes concessions that imply greater austerity, will the Greek parliament support them? If the creditors make concessions to Greece as a special case, will all the eurozone parliaments support them?

Just when we thought this movie might finally end with a bang, the projectionist is loading in yet another long and tedious reel.

Having fallen sharply in recent sessions, Europe’s stock markets took the glimmer of hope as a strong signal to rebound. Both the German and French indices soared 3.8%.

Watch this space.

Records

The positive mood flowed across the Atlantic and sent the Dow up 166 points by late morning. Aside from the Greek news, a 5.1% rebound in May for existing home sales, following a drop in April, was well received. It’s the fastest monthly sales rate since the last month of Obama’s first home buyer’s grant program back in 2009.

Wall Street did not manage to hold onto its gains nonetheless, and drifted off through the afternoon. However this did not stop both the Nasdaq and Russell 2000 small-cap index finishing in record territory. European markets may have suffered a deal of volatility on the Greek issue, but US markets have largely taken Greece in their stride.

There was obvious relief in global bond markets, which last week saw precautionary buying ahead of a possible Greek default. The yield on the German ten-year rose 13 basis points to 0.88%, and the yield on the US ten-year rose 9 basis points to 2.36%.

One might have expected the euro to respond in a similar vein to European stock markets, but instead the currency went on a wild ride last night on every snippet of information before settling largely unchanged against the US dollar. This would suggest the market had set itself long on a possible breakthrough being forthcoming. The US dollar index is up 0.3% to 94.36.

Which didn’t help gold. Gold found its way back to 1200 last week as the situation regarding Greece appeared to be deteriorating, so this morning it’s down US$14.40 to US$1185.90/oz.

Having enjoyed a level of support as a safe haven currency last week, the Aussie is down 0.6% to US$0.7728.

Commodities

Base metal traders were still waiting for the eurozone finance ministers’ meeting to break up as the  LME closed last night, and Chinese traders were absent due to a holiday. Lead, zinc and nickel fell over a percent while the others posted smaller, mixed moves.

Iron ore fell US10c to US$60.60/t.

The oils were quietly stronger as West Texas rolled forward into the August delivery front month, realigning with Brent. WTI rose US27c to US$60.24/bbl and Brent rose US46c to US$63.43/bbl.

Today

The SPI Overnight closed up 21 points or 0.4%.

Is this all the local market needs to encourage another leg up towards the 5700 mark, having rebounded from under 5500 to just over 5600? Not that Bridge Street has been paying a huge amount of attention to the Greek drama. And the Greek drama, make no mistake, is far from over.

Locally we’ll see a March quarter measure of house prices today before the flashers jump out from behind the trees. HSBC will provide its estimate of China’s manufacturing PMI for June and Japan, the eurozone and US will follow.

Closely watched durable goods data will be released in the US tonight along with new home sales, house prices and the Richmond Fed activity index.


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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)

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

Restored

The wider world may have been worrying about Greece on Friday but clearly there were no concerns on Bridge Street, where an across the board rally restored the ASX200 to the level it had attempted to reach on Wednesday, being just below 5600. Wednesday’s attempt was thwarted by a big sell-off on Thursday, which appears to have been purely related to the expiry of futures and index options.

The index rallied 1.3% on Friday and there was little variation from this average among sector moves, suggesting this was very much a “Buy Australia” trade. This implies a level of foreign participation, which is fitting given it was foreigners who bailed out of the Australian market earlier in the month to send it hurtling down to just below support at 5500. The earlier support level of 5600 will now become resistance as the market looks for some stability.

Immediate stability may well depend on Greece.

Bewitched

In Australia, derivatives expiries are split into two sessions, being futures and futures and ASX index options on the second last Thursday of the month and stock options on the last Thursday of the month. While derivatives expire every month, quarterly contracts are still by far the most popular, thus June is one of four big expiries months and also end of financial year for most, thus offering potentially the greatest level of volatility, as was seen on Thursday.

While June is not EOFY in the US it is still a major expiry month, and on Wall Street all four equity derivative classes expire on the third Friday of the month. Hence the label “quadruple witching”. This occurred on Friday night, and while the US indices were soggy for most of the session, a late selling rush was attributed to expiry.

The Dow closed down 99 points or 0.6%, the S&P lost 0.5% to 2109 and the Nasdaq pulled back 0.3% from Thursday night’s all-time high. Sogginess on Wall Street was attributed to Greece.

The Greek situation is currently a very fluid one, with much development between the close of Wall Street on Friday and this morning. On Friday night the only news was that the ECB had been forced to extend emergency funding to Greek banks as a run on those banks accelerated in earnest. On Friday night it was assumed Greece and its creditors were still at a position of stalemate, with the creditors having now drawn a line in the sand and the Greek government having rejected that line.

It was also known that the EU leaders had brought a meeting previously scheduled for this Friday forward to tonight. With negotiations seemingly at an impasse and money pouring out of Greek banks, the assumption was that this would be a crisis meeting convened not to try to come up with a new deal to offer Greece, but to prepare for the fallout from a Greek default.

To that end, the US ten-year bond yield fell 8 basis points to 2.27% on Friday night.

White Flag?

However yesterday morning, the news was that the Greek prime minister would present a new deal to the creditors tonight. As a result, the eurozone finance ministers have hastily organised to meet again tonight, having met only on Thursday night, the sole purpose being to discuss what Tsipras is now offering. The finance ministers will meet ahead of the meeting of EU leaders.

This morning the news is that the new deal offered by the Greek government is, in Tsipras’ words, “mutually beneficial” to both parties. Tsipras has spent the past couple of weeks calling the creditors’ demands “absurd”, and last week the IMF withdrew from negotiations saying only that it expects its money on June 30. Has Tsipras being playing the game to the eleventh hour in the hope the creditors would buckle, only to find that ultimately it is he who must buckle?

The suggestion is that the new deal offers some ground on the particular sticking points of the creditors’ reform package, including an increase in the pension age and a broader based consumption tax. Maybe if the concessions are sufficient for an EU and eurozone not wishing to see an exit of one of its members, then the day might be saved.

However, this would mean tougher austerity ahead for Greece, and that’s exactly the opposite of the platform upon which the Greek left wing coalition was elected. Yet polls suggest 62% of Greeks want to stay in the euro, so we have a rock and a hard place situation, or a cake and eat it too. Were the creditors to accept Tsipras’ new proposal, the deal will have to be taken to each of the seventeen eurozone parliaments for approval. The questions then are (1), will every parliament provide approval – some leaders have been vocal on the “kick them out” side – and perhaps more importantly (2), will the left wing majority Greek parliament concede to tougher austerity measures and thus a betrayal of their electors?

If not, well, who knows what happens next. The process of parliamentary approval will probably take longer than the week available before the IMF repayment is due, but then if it looks like a deal may have been reached, the IMF can always hold out for a bit.

The ECB may be a creditor and at this stage the only lifeline Greece has ahead of a bank collapse, but the central bank is likely to take direction from what the politicians decide. No doubt the ECB will extend further emergency funds to Greek banks tonight ahead of the various meetings. As for tomorrow night, that remains to be seen. If there is no resolution, presumably currency controls will be put in place in Greece tomorrow night.

Watch this space.

Commodities

While Greece has been drawing the world’s focus, the Chinese stock market has been quietly plunging.

On Friday the Shanghai index fell 6.4%, bringing the fall from its peak a bit over a week ago to 11%. Once upon a time, this would have spooked the hell out of regional markets, including Australia’s. Readers may recall it was the “Shanghai Surprise” of February 2007 that set in train a serious of global sell-offs that also initially surprised, before ultimately leading the world to learn of things called “subprime mortgages” in the US.

But on Friday, all regional stock markets, including Australia’s posted solid gains. Given the Shanghai index has doubled and tripled in such a short space of time, driven by the end of China’s property boom and accommodative policy from Beijing, any correction would need to be rather substantial before global markets are really going to become concerned.

While the correlation is potentially a little spurious, it is interesting to note that in the time the Shanghai index has fallen 11%, the spot iron ore price has fallen 7%. On Friday the iron ore price fell another US20c to US$60.70/t.

Falling stock prices in China introduce a new concern for LME traders, who are already worried about Greece and Fed rate rise timing. On Friday night all base metals bar tin fell 0.5-1.5%, led by copper.

Over in the oil markets, amongst everything else going on in the world the Saudi oil minister suggested on Friday night that if were demand for oil to improve, OPEC would not hesitate in further increasing production. If so, this would rather put a cap on any potential oil price rise from here.

West Texas fell US$1.03 to US$59.46/bbl and Brent fell US$1.37 to US$62.87/bbl.

The US dollar index was relatively steady on Friday night at 94.09 and ditto gold at US$1200.30/oz. The Aussie was down 0.3% on Saturday morning at US$0.7772.

The SPI Overnight closed down 3 points.

The Week Ahead

Greece: see above.

It must be noted that the consensus view amongst fund managers has long been, and still is, that somehow, in some way, the Greek can will get kicked down the road. That’s why unlike years gone by when the potential for a Grexit sent markets spiralling, not a lot of angst has been evident this time around. On that basis, were a resolution to come out of tonight’s negotiations, any relief rally would be minimal given there has been no great sell-off so far.

If Greece does default, well, nobody knows.

Chinese markets are closed today for Dragon Boat Day, as you do.

Tomorrow sees a flash estimate of China’s June manufacturing PMI from HSBC, alongside equivalent flashes from Japan, the eurozone and US.

It’s a busy week of data in the US for the data-dependent Fed, and thus the market, to contemplate. Tonight sees existing home sales and the Chicago Fed national activity index, tomorrow brings new home sales, FHFA house prices, durable goods and the Richmond Fed activity index.

On Wednesday the US March quarter GDP is revised for the last time before the first estimate of June quarter GDP is released next month. Economists are forecasting a revision up to minus 0.2% growth from the previous minus 0.7%. Personal income & spending numbers are out on Thursday and consumer sentiment on Friday.

Australia will see a quarterly house price index out tomorrow in a week largely devoid of fresh data. As noted, stock options expire on Thursday.

On the local stock front, there is a large number of mostly REIT/infra names going ex-div on Friday.

Rudi will appear on Sky Business on Wednesday at 5.30pm and on Thursday at noon and again on Friday, 8-9pm, for Your Money, Your Call - Bonds versus 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: Lock The Doors Spiro

By Greg Peel

The Dow closed up 180 points or 1.0% while the S&P rose 1.0% to 2121 and the Nasdaq gained 1.3%.

Volatility

The interesting aspect to yesterday’s plunge in the ASX200 can be highlighted with hindsight, knowing that Wall Street rallied so strongly last night. While there is some confusion over news coming out of Europe this morning regarding Greece, the bottom line is Wall Street rallied last night as a next-day response (the big moves usually come the next day) to Wednesday night’s Fed statement and press conference, which implied to most that a September rate rise is no longer a given.

In other words, Bridge Street did not tumble yesterday because of the Fed. One might argue that Bridge Street tumbled due to the increasing risk of a Greek default, but if that were the case, why did we rally a percent on Wednesday? Nothing changed in between.

Hence we must assume the percent up-percent down moves the past two sessions were domestically driven. So, what changed from one day to the next? The banks, most notably, were darlings on Wednesday and pariahs on Thursday. Perhaps an explanation can be given by yesterday’s expiry of the June SPI futures contract and ASX index options – instruments used by large funds managers as hedging tools and others as speculative replicants.

It has been a horrendous two days for option market makers – those proprietary traders who are typically net sellers of calls and puts. As expiry approaches, each little move up or down in the index forces short option holders to buy going up and sell going down to ensure their risks are hedged. This necessity becomes even more self-defeating the act of buying pushes the index higher, requiring more buying, and vice versa on the downside.

Now we have the Dow up 180 points and the SPI Overnight – the new September front month – up 39 points. If Thursday cancelled out Wednesday and expiry is now over and done with, what happens from here should be more “real”. Mind you, we are about to head into the last week of trading before the end of the financial year, and that can also bring its own volatility.

Greek Drama

It wouldn’t be a good Greek drama without unconfirmed reports, denials, rumours and speculation, and last night saw plenty going on.

It is important to first appreciate that June 30 represents two critical events for Greece. One is the repayment date of its bundled IMF payments which if missed, sends Greece into default, and the other is the expiry of the current bailout tranche and potential payment date for the next tranche. It is assumed Greece cannot afford to repay the IMF unless it receives the next bailout tranche.

Why not just net them out then, I hear you think. Well the granting of the next bailout tranche is incumbent upon Greece agreeing to further austerity reforms, which it refuses to do.

As the eurozone finance ministers met in Luxembourg last night, a German newspaper reported, after the close of European trade but around mid-session on Wall Street, that the European Commission and ECB were considering breaking from the IMF to provide Greece with an extension of credit out to the end of the year. If this is the case, Greece could pay the IMF and avoid default, leaving more time for Greece to sort itself out and for negotiations to continue.

And we could then all be bored witless by Grexit talk right through to Christmas.

An already strong Wall Street popped further on this news, but it was quickly denied by the Germans. Christine Lagarde also made the point that there would be no extension granted for Greece to pay its IMF obligations. When the ministers emerged from the meeting, they did so with no deal of any sort having been achieved.

Then it got interesting. Reuters reported an overheard conversation in which one attendee was asked “Will Greece need to close its banks tomorrow [tonight]?” to which the response was “No not tomorrow, Monday”. We recall also that the ECB has been keeping the Greek banks, as opposed to the Greek government, on a separate liquidity drip to prevent their collapse while the credit negotiations have continued.

With all the talk of a Grexit being more likely, what had been a “walk” on Greek banks before this week has become more of a “trot” this week. The chances are, tonight that trot could become a fully blown run, forcing the banks to pull down their shutters over the weekend.

What we do know for certain is that the EU leaders’ meeting scheduled for later next week in Brussels has now been hastily brought forward to Monday. This would suggest it has become a crisis meeting with regard how to deal with a Grexit. The fact this meeting has been rescheduled is only more incentive for Greeks to try and get their euros out of the Greek banks tonight. The ECB could well shut off the tap next week.

Getting their euros out is one thing, but if currency controls are implemented, they may yet be subject to massive devaluation into drachma, unless they can be taken across the border. Look for Greece’s border crossings to be armed.

Or a deal will be reached. Chances? Well, a lot of people in the market still believe this is the only outcome, and clearly that would require capitulation from the lenders given the Greek government appears to be stubbornly defiant. But what message would that send to the rest of the eurozone periphery?

Who Cares?

If a deal is, by some miracle, reached, that would be positive for markets. If a Grexit occurs, is that negative? The common assumption is yes, for about five minutes. Then it becomes a positive, because the whole sordid, frustrating story will be over. The greatest enemy of markets is uncertainty.

This appears to be the way Wall Street was taking it last night. As the news out of Europe turned negative during the afternoon, Wall Street shrugged. The Nasdaq hit a new all-time high, as did the Russell 2000 small-cap index. The Dow and S&P held onto the bulk of their earlier gains.

Those gains represent a shift in expectation, in the wake of what was considered a dovish Fed statement and press conference, from a September first rate rise to a December first rate rise.

Such a view is supported by a 0.2% fall in the US dollar index to 94.04, and a sudden US$16.80 jump for gold to US$1202.00/oz. Or is gold jumping ahead of a Grexit? Doesn’t matter, it’s simply stuck at 1200 again.

But just to throw the spanner in the works, the US ten-year bond yield rose 5 basis points last night to 2.35%.

Commodities

It was the first chance for the LME to respond to the Fed last night, Greece notwithstanding, and nothing happened. Moves were inconsequential except for tin, which popped 3%.

Iron ore is unchanged at US$60.90/bbl.

The oils are a little stronger, with West Texas up US68c to US$60.49 and Brent up US47c to US$64.24//bl.

Today

As noted, the SPI Overnight closed up 39 points or 0.7%. The Aussie is 0.5% stronger at US$0.7798.

The Bank of Japan will hold a policy meeting tonight, although nothing new is expected.

Tonight is quadruple witching in the US, which involves the same type of index and option expiries the ASX saw yesterday. There is a suggestion last night’s big moves up on Wall Street may also have lent themselves to some expiry influence.

Locally, the quarterly promotions/relegations of stocks in the S&P/ASX indices come into effect this morning.

And unless he was bluffing, Alexis Tsipras meets with Vladimir Putin tonight.
 

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article 3 months old

The Contrarian’s View On European Stock Indices

By Kathleen Brooks, Research Director UK EMEA, FOREX.com

The sell-off in European stock markets has been incessant in recent days, and trying to go long at these levels is starting to feel like catching a falling knife. However, some clever folk over at Bloomberg have developed a tool that lets you track cyclical behaviour in an asset class in an attempt to analyse future price direction.

We decided to test this out with the European stock index, Eurostoxx 50. As you can see, since 1995 this index has been through 5 cycles. The rally from 2003 – 2007 lasted 17 quarters. The sell-off from 2007 – 2011, which saw the index drop sharply during the financial crisis before moving sideways for another few years, also lasted for 17 quarters. This takes us to the present. The current long-term uptrend in the Eurostoxx index started in Q4 2011, if this pattern of cyclical length continues then we may expect the uptrend to also continue for 17 quarters, which would take us to the end of 2015, see figure 1.

We should mention a few massive caveats here. Firstly, Bloomberg did all the hard work for this analysis, we are mere conduits. Secondly, history does not always repeat itself, so just because the couple of cycles prior to this one have lasted 17 quarters does not mean that the current one will. Lastly, we have no idea how the markets would react to an actual Greek default and exit from the Eurozone, which is looking more and more likely. An event of that magnitude may cause a cycle to come to an abrupt halt.

However, if (and that's a big IF) the cyclical trend continues, then the recent declines in the European bourses could become a good buying opportunity. Something that we brought to your attention a little while ago was the fact that, prior to this sell-off, the Eurostoxx index had been outpacing the S&P 500, see figure 2. However, in recent days the European index has sold off at a faster rate than the US index. If the above cyclical trend is to hold this time around then when the current panic in the market subsides we may expect the Eurostoxx 50 to return to outperforming the S&P 500.

Overall, if European indices can recover from the Greek-inspired sell-off then the boost from the ECB's QE programme could help to power the long-term uptrend in the Eurostoxx 50 until the end of this year.

Takeaway: 

  •          If the cyclical trend persists then the current uptrend in the Eurostoxx may last until December, suggesting that the current sell-off in European stocks could be temporary.
  •          If the Eurostoxx index can recover from recent losses then it may return to outperforming the S&P 500.
  •          Obviously, history does not always repeat itself, especially since a Greek default and European exit could trigger further losses for this index.
  •          In conclusion, although this analysis is interesting, we recommend using it with caution.

 



 
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article 3 months old

The Overnight Report: Clueless

By Greg Peel

The Dow closed up 31 points or 0.2% while the S&P gained 0.2% to 2100 and the Nasdaq added 0.2%.

Excitement

Gotta love that red cordial.

Bridge Street was buffeted by the winds of exuberance yesterday on the thought that the biggest investor of them all might be interested in little old Australia. Not just an insurance partnership, it would seem, but perhaps banks as well and, gosh, who knows what else?

The financials led the charge yesterday with a 1.6% gain and to be fair, there has been much talk from stock analysts that following their solid correction, bank shares have returned to something estimating reasonable value. But falls in base metal prices and a near 4% plunge in the iron ore price overnight did nothing to prevent a 0.8% gain for the materials sector, and there was no rise in oil prices to justify a 1.6% jump for energy.

When the dust had settled only the fully valued healthcare sector missed out on the fun, falling 0.1%, while consumer staples remained flat on the news a failing supermarket chain had decided to pull the trapdoor underneath its CEO.

Insurance market analysts were quick to dismiss any notion yesterday, nonetheless, that Berkshire Hathaway’s partnership deal with IAG represented any form of endorsement of the Australian market in general by the great man himself. The deal is all about a safe and secure backdoor entry into China – the ultimate objective.

A 1.1% rally for the ASX200 represented a potentially risky trade yesterday, ahead of last night’s Fed statement release and press conference, and ahead of tonight’s meeting of eurozone finance ministers (See: Greece). The greater risk was and is to the downside.

Later This Year

That the US stocks markets moved only slightly last night and the US ten-year yield lost a mere point to 2.31% is testament to the fact last night’s Fed statement offered nothing new in the way of policy guidance, and Fed chair Janet Yellen was very careful to be vague at her press conference. “September, December, March…whenever it does happen…”

The US markets decided it was a rather dovish stance taken by Yellen, when no one would have been surprised if she had blurted out “Lift off in September!”. In her press conference Q&A, she variously waved around “later this year” and, as noted above, maybe not even until March as possible timetables. Thus market commentators remain split this morning between those believing there will not be a rate rise this year, and those still believing there not only be a rate rise in September, but in December as well. Yellen offered nothing that might bring those two camps closer together.

Or did she?

Personally, I suggest that behind the vagueness is a very specific intent. Yellen does not want to make the mistake made by her predecessor who, in 2013, sparked the so-called “taper tantrum” by being less guarded. Yellen, and other FOMC members, have been at pains to entreat the market not to worry the timing of the beginning of the tightening cycle, but of the timing of the cycle itself. The word they are yellin’ from the rooftops is gradual.

Which says to me they have every intention of implementing the first rate rise in September, and have done so for a while, so between now and then the clear intention is to play down the importance of that historical event in order to head off potential market volatility. Do not fear a little 25 basis point increase, they are saying, because the march back to “normalisation” from zero is a long one, and will be a very gradual one, but as someone once said, it must begin with the first step.

It may then be a second rate rise will not been seen this year, as the Fed hammers home this point and allows plenty of time for the dust to settle on the first hike.

Note that Fed policy meetings are held on a six-week rotation, not monthly like everyone else, meaning the only meeting between now and September will be in July. September is a quarterly meeting, meaning a press conference, and Yellen would not want to announce such a historical step without being in a position to field questions. The only reason a rate cut would not be forthcoming is if US economic data suddenly take a turn for the worse in between, and the June quarter GDP result proves a serious disappointment.

And just on that other source of potential market volatility, news just in is that Alexis Tsipras has organised an audience with Vladimir Putin on Friday night, after tonight’s eurozone finance ministers’ meeting. Clearly it is an attempt to gain some leverage with Europe, but then he has played the same fiddle before.

Ironed Out

The iron ore price pays little heed, if any, to US monetary policy. It fell another US$1.20 last night to US$60.90/t.

The LME pays no heed to Fed statements on the day of their release, because it closes beforehand. Thus last night base metal prices were relatively steady, moving slightly in either direction.

The oil markets “officially” close beforehand as well but continue on thereafter electronically, but little movement is evident anyway. West Texas is down US26c at US$59.81/bbl and Brent is down US3c at US$63.77/bbl.

Gold is the “commodity’ most impacted by monetary policy, and it’s up US$3.60 to US$1185.20/oz.

The US dollar is really the only financial instrument to have shown any significant response overnight, falling 0.7% on its index to 94.25 to imply forex markets read a dovish tone into the press conference.

The Aussie, nevertheless, is unchanged at US$0.7752.

Today

The SPI Overnight closed down 4 points.

New Zealand’s March quarter GDP result is out today. The RBNZ has already cut its cash rate this month of course, after previously hiking, proving yet again that central banks always go that one step too far.

An RBA Bulletin is out today but is unlikely to reveal anything new. It’s quarterly expiry day today on the ASX for SPI futures and index options, which can lead to some volatility.

The US CPI numbers for June are out tonight. The Fed doesn’t pay much attention to price inflation, preferring to assess the PCE (private consumption & expenditure) measure of inflation instead.

The fate of Greece will likely not be decided tonight as the eurozone ministers meet, but word is the EU is now preparing itself for a Grexit. A large crowd rallied in Athens last night in support of Tsipras’ defiance.

Rudi will make his weekly appearance on Sky Business' Lunch Money today, noon-12.45pm.
 

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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