The fiscal cliff roller coaster continued overnight with early stock market losses in Europe and the US reversing after Republican leader and House Speaker John Boehner said that he is willing to put revenue on the table and is hopeful that a deal can be done over the fiscal cliff. This helped stocks turn around and also drove Aussie dollar and euro off their lows.
I would be really surprised if ultimately some deal is not done even if it is a European style can kicking exercise.
So consistent with the previous days trade the data in the US has been largely ignored. New Home Sales were down 0.3% last month but even though this was better than the expected fall of 0.8% the data was heavily revised. This morning the Fed released the Beige Book which was more pessimistic than the recent data has suggested on manufacturing.
In Europe there seems to be some residual concerns about the Greek deal but even my 10 year old son knows that Greece is still going to have problems with economic growth, austerity and debt for years to come. What the Greek deal did as its major achievement is take away the event risk of a near term Greek implosion or Grexit.
At the close European stocks had come back late in the day with the big markets in London, Frankfurt and Paris in the black but Madrid was lower. The FTSE rose .06%, the DAX was up 0.15% and the CAC rose 0.37%.
In the US the Dow has recovered from heavy losses early when it was down 100 points to currently sit up 96 for a rise of 0.73% with 15 minutes of trade left. The S&P similarly recovered from early losses and is up 0.66% at 1408 while the NASDAQ is also 0.73% higher.
Silver and gold both reversed again overnight losing 0.94% and 1.38% to sit at $33.66 and $1718 oz respectively. Silver did however have a very strong bounce off its low of $32.90 so there remains residual support but the overhead trend line we highlighted a couple of days back remains important resistance.
Crude was off sharply at one point but recovered when the EIA data was released and showed a draw of reserves of almost 400000 barrels against market forecasts of a 500000 barrel rise. At the close crude was down 0.79% to $86.49 Bbl. Ags were quiet after yesterday’s big moves higher.
Euro and AUD were under pressure overnight until the comments from John Boehner turned sentiment around in stocks and with that also in Global FX markets. The AUD spiked higher along with stocks at the precise moment that they started to rally technically it is a bit mixed but if stocks are going to rally and if, its a big if, a resolution to the fiscal cliff comes eventually then it is probable that the AUD eventually drives higher. It remains well supported.
Elsewhere on global FX markets the pullback in USDJPY continues and it looks biased back toward 81.37 which is the 38.2% fibonacci retracement level. USDJPY is down 0.32% on the past 24 hours for the biggest move of the big 6 currencies. The AUD is up 0.24% at 1.0470 and we will get a chance today to see how strong the selling up here will be again.
Lets have a look at some Meta 4 charts from my AVATrade platform.
EUR/USD: The test lower reversed with stocks after EUR traded down to a low of 1.2878 before bouncing to sit at 1.2925 as I write. As you can see on the 4 hour chart below the bounce was solid and any further positives on the cliff are likely to support EUR.:
AUD/USD: AUD made a low of 1.0424 not quite the 1.0415 we’d been expecting and the bounce to the top of the recent range puts the focus back on the topside. Can it break the recent high at 1.0489 – eventually yes:
Data: In Australia we get Private New Capital Expenditure which is important in the context of the mining investment boom (as it is now called) and we also get HIA New Home sales. In New Zealand we get business confidence later today and then tonight a raft of data in Europe including German Employment, British Mortgage Applications, and then Eurozone Economic confidence and then in the US thee next read of GDP for Q3 which I’m guessing and the market is expecting is going to show an upward revision.
Here is how the markets looked at 7.30 this morning.
Twitter: Greg McKenna.
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