A quiet night in terms of data saw a continuation of the afterglow of Friday’s reappraisal of Draghi’s success in isolating the Bundesbank.
In Europe bonds rallied again and equities got a lift. In the US stocks closed at 3 month highs but a large part of the gain was given up in the last hour of trade with the Dow falling from 13120 to close around 13056. In FX land it was a game of two halves with the Euro falling to find support at the trendline it has broken up through before rallying back above 1.24.
Interestingly, part of what Draghi has done, as Delusional Economics wrote yesterday, is that he has made the rescue of Spain and or Italy if required conditional on their Governments asking for help which of course will come with conditions. In doing so he has taken the pressure off Spanish and Italian Yields and relieved the very pressure to access the bailout. Spanish 2 year yields are back the mid 3% range which is less than half of what we saw just a month ago.
At the close of play Madrid was up 4.24%, the FTSE rose 0.37%, the DAX was up 0.77% and the CAC rose 0.77%. Spanish 10’s were down another 11 points to 6.73%. In the US the Dow closed up 0.16% to 13,117, the S&P 500 up 0.23% to 1,394 and the NASDAQ up 0.74% to 2,990.
As noted in FX Land the Euro fell early, probably on Monti’s comments about self interest in the Eurozone causing pressure and potentially a break up of the Europe, the “psychological dissolution” in his words. The Australian Dollar rose to 1.0590 overnight just shy of important resistance around 1.06 while the US Dollar index fell to 82.10 before rallying a little.
On Commodity markets the CRB was up around 0.3% to 301.75 with cotton the biggest mover up 2.35% with natural gas up 1.67%. Crude was 0.71% higher to $92.05 Bbl. $93.17 is the big overhead level and a push through there opens up substantial top side.
Briefly in other news:
- The Wall Street Journal reports that the Fed’s Senior loan survey showed “U.S. banks eased their lending standards for loans to large- and medium-sized businesses along with auto loans and credit cards on strong demand in the second quarter, but remained wary of the home-loan market”.
- Bloomberg reports that Berkshire Hathaway’s cash hoard has swelled by 7.5% to $40.7 billion as Warren Buffett has been a net seller of consumer goods companies.
- Standard Chartered Bank is in some serious strife in the US and is being investigated by the NY regulators for hiding $250 billion in allegedly illegal transactions for Iran.
Lets have a look at some of the markets that we follow.
EUR/USD: Euro pushed through last week’s highs initially but couldn’t kick on with it in early European trade coming under pressure before finding support at the downtrend line it broke up through recently. Momentum is fading on the 4 hour charts as the Euro consolidates and we could see a move back toward 1.2330/50 again.
Longer term the down trend remains intact with resistance at 1.2472, 1.2572 and 1.2740/50. Support is 1.2300/10 and then 1.2050/1.2110.
AUD/USD: The AUD is at the top of what is a fairly clear daily uptrend from the last two months trade and continues to have a reasonably big level overhead at 1.0680/90 which is the tentative downtrend line from the 1.1080 high in 2011.
The last day’s trade was very indecisive with a downside bias probably today before the RBA. Support is 1.0530/40 again today and on the week 1.0450 which held so well last week will be solid.
DATA: Obviously the RBA is the highlight in our time zone today and while most pundits don’t expect any moves I will be interested to see if they note anything about the strength of the Australian Dollar which is diverging from what we might term “fundamentals”. Then tonight it is a huge night for Industrial Production in Europe.
Here is today’s data and you can click here for the full week’s calendar. Please note that data coloured blue is important to me and that which is coloured red is important to everyone.
And here is how the markets closed at 6.00 am Saturday Morning courtesy of AVATrade
Twitter: Greg McKenna. He is the Chief Investment Officer of Macro Investor, Australia’s independent investment newsletter covering trades, stocks, property and yield. Click for a free 21 day trial.
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