A volatile 24 hours with Asian weakness moving into Europe before rumours and hopes saw a late rally near the close buoying the US markets which had started down. But in the last hour of trade everything seems to have reversed for the US and the sellers have re-emerged.
Europe had a couple of catalysts for its late rally. The first was speculation of a huge turnaround by Germany from dragging its feet on aid to the potential payout of 3 tranches at once. The source of the rumour was a report in Bild-Zeitung citing unnamed German Government sources and a comment attributed to German Finance Minister Schaeuble which seemed to confirm that paying out the three tranches is on the table. The second catalyst, which saw Spanish stocks surge into the close, was a rumour that Spain was going to ask for help and that as a result the ECB would be buying Spanish bonds soon.
There was also a better than expected Greek auction where it raised €4.06 billion of 4 and 13 week bills and so looks likely to be able to pay the ECB the €5 billion it needed to find by Friday. But earlier, the ZEW survey of German economic sentiment was a shocker at -15.7 versus -7 expected (how did the pundits come up with that guess?) and from -11.5 previously. The overall Eurozone ZEW survey was also weaker at -2.6 from -1.4 previously.
Even with the late turnaround in the global bellwether of stocks and risk – the S&P 500 – there is a change it might be trying to form a bottom. The negative DMI has slowed, the MACD is at an extreme level and trend line support has been found. Add to that that on this chart it looks like we might have a swing low. So I’m lifting shorts which would be reinstituted only if the price falls through 1362 or I get a signal on any rally to get back in.
At the close of play European stocks were higher with the FTSE up 0.33%, the DAX was flat while the CAC rose 0.56%. As noted above the market in Madrid kicked quite a bit higher into the close and was up 1.76% on the day.
In the US the glow from Europe was aided by an earnings report from Home Depot which reported better earnings than expected and upgraded prospects on the back of improvements in the housing market which was good news for the company and the market in the US. In the US there has been a massive reversal since I started writing this report a couple of hours ago and the S&P 500 is now down 0.36% to 1375, the Dow has dropped back to 0.4% and the NASDAQ is off 0.69% with 2 minutes to go.
More crude news overnight with the IEA releasing a downgraded demand forecast for oil for the 4th quarter of 2012 . MarketWatch reported that:
The IEA, in a monthly report released Tuesday, cut its forecast for fourth-quarter global oil demand to 90.1 million barrels a day, a reduction of 290,000 barrels a day, citing the impact of Hurricane Sandy in the U.S. and ”persistent weakness” in Europe.
Crude was 0.53% lower to $85.12 bbl and gold fell a similar amount to $1,721 oz. Silver continued to be high beta gold dropping 0.98% to $32.19 oz while the Ags bounced a little after the sharp sell off over recent days. Corn was up 0.63%, wheat rose 0.26% and soybeans were 0.67% higher.
On Global FX markets it was volatile. Euro had a low of 1.2660 a high of 1.2726 and sits at 1.2706 at the moment but is roughly unchanged on the past 24 hours. GBP is the same – unchanged on 24 hours but having traded down to 1.5855 and up to 1.5915 sitting at 1.5875 presently. The Yen likewise sits at 79.39 a little stronger versus the USD as is the Aussie which has had trouble getting through that 1.0440/50 region again. It is a messy daily chart for the Aussie with no apparent trend so I prefer the AUD crosses.
Lets have a look at some Meta 4 charts from my AVATrade platform.
EUR/USD: Euro is still in a very strong down trend and longer term I am targeting 1.20/1.21 but last nights price action was a tentative sign that we might see a bounce. If I go one time frame down from the dailies to the 4 hour charts I see a move through 1.2740 opening the way for a run higher – but it has to get through there first:
AUD/USD: What can I say – nothing to see here move along. AUD is trapped between 1.04 and 1.0450 at present and I prefer to play the crosses:
Data: In New Zealand we get retail sales which will be interesting for AUDNZD, then we get Westpac Consumer Confidence in Australia and the Wage Price Index. Indian inflation price data is out this afternoon and then we’ll be watching unemployment in Britain, GDP and unemployment in Portugal, Eurozone industrial production and a speech by BoE Governor King in European trade before we head to the US for retails sales, PPI, Business Inventories and the FOMC minutes..
Here is how the markets looked at 7.11 this morning.
Twitter: Greg McKenna.
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