Stocks recovered the losses seen on Friday and rallied by 2.5% at the start of the week meaning that the S&P Index is poised to trade its biggest quarterly percentage gain since 1998, underpinned by the hopes of a stimulus-backed economic rebound from the world’s central banks. Monday saw a 14% surge in Boeing shares after a successful test flight of the 737MAX, which helped improve sentiment, and traders ended the day in an upbeat mood despite the spike in virus infections in the Southern and Western US states at the end of last week. Also helping the optimistic atmosphere was the release of the May Pending Home Sales which have been enormously volatile recently. The May figures came in at +44%, as opposed to the expectation of +18.9% and the April figure of -21.8%.
The FX markets were generally subdued although it was noticeable that the Jpy and the Chf were both under pressure as risk sentiment improved – meaning that safe haven demand diminished a little. Sterling also remains under pressure amid concerns over the UK’s post-Brexit spending plans, at a time when concerns are growing that the latest round of UK/EU trade talks, which resume this week, are unlikely to yield any real progress.
In the commodities markets, Gold and Silver tracked sideways, but do look set to test higher levels. Noticeably, Iron Ore lost 3%, which may put a little downside pressure on the Aud$ today. Oil had a good session, rising by 3.75% despite the rise in Covid cases, on hopes that the US economic data will improve over time, and underpinned on Monday by the jump in the Pending Home Sales.
Looking ahead, Tuesday will see the China Official Mfg/Non-Mfg PMIs, the Australian Private Sector Credit (exp +0.2%mm), and a speech from the assistant governor of the RBA, Guy Debelle. Also, note that it is the last day of the Australian Financial year which will likely see some rebalancing of stocks in what looks likely to be a positive session on the ASX.
Later on from Europe, the UK GDP (exp -2.0%qq), and the EU CPI (exp +0.1%mm, +0.8%yy) will be released, while the main events of the day will come from the testimony of Fed Chair Powell to Congress, along with a speech from the US Treasury Secretary, Mnuchin. Also from the US we can expect the Case Shiller House Price Index and the API Weekly Crude Oil Stock Inventory.
Economic data highlights will include:
Tue: NZ Business Confidence, Activity Outlook, Australian Private Sector Credit, China Mfg/Non-Mfg PMIs, Japan Preliminary Industrial Production, Unemployment, Housing Starts, Construction Orders, UK Current Account, Total Business Investment, Q1 GDP, German Import/Export Index, EU CPI, US Fed Chair Powell Testifies, Treasury Secretary Mnuchin Speech, Case Shiller House Price Index, Consumer Confidence, Chicago Purchasing Managers Index, API Weekly Crude Oil Stock Inventory
Market moves, in brief:
FX: DXY 97.46 (-0.04%)
Bonds: US10Y; 0.626% (-2.5%), German 10Y; -0.470% (+2.19%), UK 10Y; 0.156% (-9.02%), Australian 10Y; 0.894% (+1.86%), NZ 10Y; +0.92% (-3.38 %), China 10Y; 2.913% (+0.52%)
Stock Indices: DJI; xxx%, S+P; xx%, NASDAQ; xxxx%, EUStoxx50; xxxx%, FTSE100; xxxx%, Shanghai Composite; xxxx%, ASX200: xxx%
Metals: Gold $1772 oz (0.07%), Silver $17.85 oz (0.23%), Copper $2.6835 lb (+0.92%), Iron Ore $97.6 per tonne (NYMEX) (-3.20%),
Oil: WTI $39.62 pb (+3.77%)
|INDICES / COMMODITIES|
Stocks have turned to point higher in the short term but in the bigger picture I think conditions are going to remain extremely choppy. Picking a range with a defined SL does seem to be the way to go. For the S+P, I am still sticking by 2980/3165 with around a 40 pint SL on either side. Note that the Australian FY turns over today, which will see a good deal of repositioning of portfolios. Right now buying dips may be the plan. The SPI is currently at 5875 and the ASX200 is at 5920 and they do seem set to test 6000 and 6040 respectively although both need to clear their respective 200 HMA which currently lie right ahead.
Elsewhere, the Jpy seems under pressure and while US$Jpy is very choppy we may want to take a look at 108+ in the next couple of sessions. A break of 108.30(200 DMA) sees little resistance until 109.00 and then again until 109.50/80.
Cable still looks heavy and I prefer to remain long of EurGbp, but prefer to buy dips at sub 0.9100.
|1 Hour||Turning Lower?||Overbought – Turning Lower?||Possible Basing Formation||Turning Higher?||Turning Neutral||Turning Neutral|
|4 Hour||Turning Neutral||Turning Higher?||Turning Lower||Neutral – Turning Higher?||Turning Neutral||Turning Neutral|
|1 Day||Turning Lower||Neutral – Turning Higher?||Neutral – Turning Lower?||Neutral – Turning Higher?||Turning Lower||Turning Lower|
|1 Week||Neutral – Turning Higher?||Neutral||Turning Neutral||Neutral – Turning Lower?||Turning Higher||Turning Higher|
|1 Hour||Neutral – Turning Higher?||Turning Higher||Turning Higher||Turning Neutral||Turning Neutral||Turning Higher|
|4 Hour||Turning Neutral||Neutral – Turning Higher?||Turning Higher||Turning Neutral||Turning Neutral||Turning Neutral|
|1 Day||Turning Higher||Turning Lower||Turning Lower||Bearish Divergence||Turning Neutral||Neutral – Turning Lower?|
|1 Week||Turning Lower?||Turning Higher||Up||Up – Overbought||Neutral – Turning Higher?||Up|
|1 Hour||Overbought – Turning Lower?||Overbought – Turning Lower?||Neutral – Turning Lower?||Turning Neutral||Neutral – Turning Lower?||Turning Neutral|
|4 Hour||Neutral – Turning Higher?||Turning Higher||Neutral – Turning Lower?||Turning Neutral||Turning Neutral||Turning Neutral|
|1 Day||Neutral – Turning Lower?||Neutral – Turning Higher?||Turning Neutral||Turning Lower?||Neutral – Turning Higher?||Turning Neutral|
|1 Week||Turning Neutral||Turning Higher||Turning Lower||Turning Higher||Turning Lower||Neutral – Turning Higher?|
ASX SPI – Hourly
EurGbp – Daily
US$Jpy – Daily