Stocks were lower overnight apparently as some concerns about the coming earnings season and exactly what game Spain is playing weighed. Reuters reported:
Spain will not make a bailout request right away and the country’s powerful regions have reiterated their commitment to meeting budget targets, Prime Minister Mariano Rajoy said Tuesday.
At a press conference following a meeting with regional leaders, Mr. Rajoy responded with a curt “no” to a question over whether a bailout request was imminent.
It is an interesting tactic but also a clear indicator that this mess in Europe remains one of politics than economics.
At the close of play the FTSE was down 0.19%, the DAX fell 0.28% and the CAC continued its more volatile trade dropping 0.6%. Somehow Spanish shares were up 1% – go figure. In the US the S&P 500 rallied a small amount, just 0.09% to close at 1445.7, the Dow fell 0.24% while the NASDAQ rose 0.21%.
To me this looks like it is just tooing and froing till the next decent piece of news like tonight’s ADP report tonight or non-farm payrolls on Friday.
In FX markets, the Australian dollar was under pressure from the RBA’s rate cut and the signs that the RBA remains concerned that when the investment in mining boom ends earlier and weaker than expected that the rest of the economy is going to struggle to fill the gap. Thus Australia faces a lower, slower growth outlook and inevitably lower RBA interest rates. The interest rate differential for me will eventually be one of the key drivers to take the Aussie lower but not yet materially.
The euro was stronger initially, rallying to a high of 1.2966 but it has pulled back a little to 1.2920 as I write this morning. Is the euro a buy on dips or a sell on rallies? It depends on your stock market outlook in no small part. If you think stocks can have a correction based on data flow then you are probably likely to see euro down through 1.28 but otherwise it remains well supported.
On commodity markets, crude was off 0.84% to $91.71 Bbl, gold sits at 1777 down 0.32% and our volatile Ags didn’t disappoint again with corn,wheat and soybeans up 0.2%, -1.46% and -1.94% respectively. Breakfast got more expensive overnight as hogs were up 2.24%, OJ rallied 2.49%, coffee rose 2.3% and sugar rallied 1.68%.
Lets have a look at some Meta4 charts from my AVATrade platform.
EUR/USD: Euro bounced off the 200 dma on Monday and 1.2800/12 remains the key short term support for the EUR and the ADX suggests the rally has washed the down trend away for the moment as euro traders figure out the next move. Below 1.28 support is 1.2733 which is the 38.2% retracement of the recent up move.
AUD/USD: The break of 1.03 yesterday which also took out the 200dma and turned JimmyR negative suggests the AUD is on its way to 1.0150/60:
Data: PMI’s in Europe and the US ADP employment report as a precursor to non-farm payrolls on Friday.
No data snapshot sorry – password again 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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