by Greg McKenna filling in for Chris Becker
Macro Wrap
If you could see my computer screen with all the Bloomberg charts you would get a real sense of just how parlous things are becoming in markets at present. I have 17 markets that I look at all the time including currencies, equities, commodities and bonds covering a period of two years. This longer period enables me to look at the bigger picture rather than just the latest news cycle or headline. What you would see if you could look over my shoulder is the complete capitulation of trends and the rollover in prices since the beginning of May but in a manner that suggests that the current market weakness – although a little oversold short term – has much further to go.
Anyway to last night’s price action. Greece and European fears dominated trade in Asia and Europe opened under pressure from what I called a rout yesterday afternoon in Asian trade. I know it’s easy to say this is all about greece or Europe but it’s not. It’s about a rerating of the global growth prospects and to this end we saw oil fall again overnight, gold slid (lower growth equals lower chance of inflation?), the US dollar gained and stocks sold off. So more of the same – downside price discovery, and as I say above, there is an acceleration happening so catching a falling knife is fraught with danger.
Oil is at 6 month lows represented by the WTI price. The chart below is indicative of this global growth rerating. As you can see there is an old trend line that goes back into 2009 and has support in the very low USD 80 bbl region which, given the red line (which has acted both as support and resistance over the last year) has broken.
Data wise in Europe, everything was overshadowed by the news that the ECB was suspending operations with some Greek banks while in the US the data on housing starts (+717k v 685k expected) and industrial production (1.1% v 0.6% expected) printed better but the Fed Minutes seemed to hit the market and equities sank into the close. As you can see in the chart below from Scott Barber at Reuters the US isn’t doing too bad all things considered:
As an indication for trade this morning the futures on overnight trading are pointing to a fall of around 6 points or 0.14% given where the SPI futures are sitting. The Australian market has broken support and is now targetting lower levels technically.
Bonds:
- US 10 year Treasuries were unchanged overnight and sit at 1.76%. German 10 year bunds closed up ever so slighthly at 1.467% as did UK 10 gilts rallied a couple of points falling to 1.87% this morning
- The periphery had a respite from its recent weakness with Italian 10’s rallying 3 points down to 5.80%, Spanish 10’s fell 5 points to 6.24% and Greece 10’s fell 60 points to 27.24%.
Currencies:
- The US Dollar pushed higher overnight once again but to the extent the overall market rout didn’t continue it fell back a little in late trade. Technically it is facing resistance in Dollar Index terms at last December’s high of 81.82 and last nights high was 81.66.Likewise last night’s low in the Euro of 1.2684 is very close to my target of 1.2660ish to have reasonably satisfied it in broad terms – there be a consolidation period ahead.
- The Australian dollar traded down in sympathy with the poor price action everywhere else late yesterday but has come back a little and sits at 0.9915 as I write. It’s time for a consolidation – even if only for a few hours or days.
Equities:
- The Eurostoxx 50 fell ever so slightly posting a decline of 0.15% and sits at 2175.34 while in London the FTSE 100 was off 0.6% the rest of Europe was off slightly except for Spain which was down another 1.33%.As you can see in the chart below Spain’s IBEX index has now taken out it’s lows of March 2009 when all markets bottomed – not good.
- The US equity markets were doing ok, kind of anyway, until the FOMC minutes came out and then they had a little swoon. The Dow and S&P were off 0.26% and 0.44% respectively while the NASDAQ fell 0.66%.
Commodities:
- Crude fell another 1.2% based on the WTI benchmark and sits at USD 92.82 bbl
- Gold (USD) held just above important support and sits at USD 1539.78 oz
- Our friend Dr Copper was belted again falling 1.36% and like other growth benchmarks has now also fallen off a cliff.
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