As I reported earlier, the Chinese Premier Wen Jiabio “surprised” the Asian markets with his comments about clamping down on China’s property bubble. The sell off didn’t continue in magnitude but Euro/US markets were subdued.
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 was down a few points, whilst the German DAX surged by over 1% The two major European bourses seem to be diverging for now, the FTSE possibly because of the higher unemployment number print last night (austerity does that chaps) and the DAX, well because they effectively rule Europe now….
The Euro (EUR/USD) fell again, now just above 1.303 as the USD continues to gain strength whilst the risk on/lower USD correlation dissipates, with the USD Index higher at 80.13 points:
As a reminder, but not a recommendation, Australian investor can go long USD using the Betashare ETF – code:USD. I regularly use this as a simple hedging tool in my super fund.
The AUD remains under pressure, breaking below 1.05 against the USD, at 1.044 this morning (Disclosure: I’m short, might add to this soon) Deus Forex Machina will have more to say about this later this morning.
On to the arguably more important debt markets, the US 10 year T-Notes continue their strong sell off, yields rising again to 2.27% and even 30 year bonds falling, yields now at 3.4%. Something is afoot here – I will cover this more closely in my Trading Week post on Saturday.
German bonds (bunds) lost ground too, with yields rising to 1.95%, a significant fall (13 basis points) with Aussie 10 year bonds joining in on the fun, with yields up to 4.13%, nearly the cash rate at 4.25% but with the yield curve still inverted.
The US equity markets all finished flat last night, consolidating above resistance levels from the April 2011 pre-correction highs.
To commodities where energies were mixed, with WTI crude finishing around $106.70 a barrel, and Brent crude just above $126USD. Some interesting reports out of the IEA bear watching (see Morning Links) – it doesn’t look like this trend is over.
Gold was pummelled again, the shiny metal falling nearly $50USD an ounce during the session, bouncing back to $1642 where it remains at the start of the Asian session. The precious metals market fell across the board actually. I’ll look at this a bit closer – and I must disclose I am short at the moment, but may add to that small position.
On these flat leads, and particularly the falls in China/Hong Kong, the S&P/ASX200 index futures point to a weaker open, but only down around 17 points or less than 0.5% to probably open around 4270 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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