Apologies for a truncated Trading Day post yesterday, but the day got ahead of me and cloning technology has not yet been perfected. It was a big night – that much is clear with a quick glance at the quote screens. But why?
As I reported earlier, the FOMC decided to keep US interest rates near zero until late 2014, which wasn’t a surprise, but also the results of the Fed’s stress tests of banks were released (not surprisingly, most past) around the same time. Combined with JPMorgan raising its dividend and performing a share buyback (who needs the capital when you can borrow it for (nearly) free and if you come unstuck, run back to the Fed for cover….) risk was on like Donkey Kong.
Lets check out what happened in detail before the open of the local markets – remember to read Trading Week to always put this daily noise in context:
Starting in Europe, the UK FTSE and the German DAX, were both up over 1%, to 5955 and 6995 points, following their American brethren. The two major European bourses have now broken the resistance barriers set by this liquidity led (LTRO) equity rally, at 5950 and 6950 points respectively, after a bear trap in recent weeks, but unlike the US markets have not cleared the April 2011 pre-correction highs.
The Euro (EUR/USD) fell below 1.31 to 1.308, and remains weak, heading to support, as the USD gains strength:
The USD Index has gained, now at 80.13 points, as a strange relationship takes shape – risk on doesn’t necessarily mean USD off anymore:
The AUD remains under pressure, steady for now at 1.054 against the USD.
On to the arguably more important debt markets, the US 10 year T-Notes were strongly sold off, yields rising again to 2.13%, German bonds (bunds) were lost ground too, with yields rising to 1.82%.
Aussie 10 year bonds were sold off sharply, with yields bursting 10 basis points to 4.02%, with the yield curve still inverted.
I said yesterday that US T-Notes bear (sic) watching – since the GFC, a relationship between the S&P500 and T-Note yields has set in. This is the true “risk-on/risk-off” meme. Heres the daily chart with a breakout clearly noted:
All US equity markets finished up nearly 2% last night, rallying hard past resistance levels from the April 2011 pre-correction highs. The S&P500 was up 1.8% to 1395 points:
The NASDAQ 100 was up 1.9% to a 11 year high, although this was a the tech-boom bubble, and at current prices looks overbought. Here’s a long run chart to put this in context (and remember AAPL makes up most of the current move!):
To commodities where energies remained flat with WTI crude finishing around $106.30 a barrel, and Brent crude just above $125USD, as a little heat comes out of the market.
Now to the surprise – well not really. Gold was pummelled after the punch bowl of QE3 was taken away again, although other causes could be behind the move, so I’m cautious (but still short). The shiny metal fell $40USD an ounce before the gold bugs stepped in at $1660, bouncing back to $1670 where it remains at the start of the Asian session. Heres the daily chart, but remember as I showed in Trading Week, on the weekly charts its still forming a bullish flag:
Obviously, the S&P/ASX200 index futures point to a much higher open, up 45 points to be around 4290 or so points.
My Trading Day post will cover the Asian market session and the “ASX8” stocks after the close in the afternoon and I’ll endeavour to do some more in depth analysis, because moves are afoot and opportunities abound as the cyclical bull market in US stocks may become a bear market rally in Australian stocks.
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