Macro Morning (no relief)

morning12111

by Chris Becker

It appeared as the European sessions gap opened down over the weekend and then rallied, as markets did in thin Asian trade yesterday morning, that some relief was in sight. As US stock markets opened that relief was replicated until near the close when everything tanked, with cash markets dropping another 1-1.5% and futures further:

Chart SP500, H1, 2014.10.13 20:50 UTC, VantageFX Pty Ltd., MetaTrader 4, Real

This move was perhaps on some more Ebola hysteria in the US, but whatever the catalyst it shows how weak sentiment is in the risk crowd. One of the major Fed officials over the weekend admitted that a slowing global economy may push out the expected rate hikes to 2016, which is not a sign of strength. European markets were up very slightly at their closes, but futures are pointing to reversal of all the gains on the open tonight:

Chart FTSE100, H1, 2014.10.13 20:51 UTC, VantageFX Pty Ltd., MetaTrader 4, Real

So we’re now looking at 7-10% falls across major stock markets, which is pushing past a “dip” and into correction territory. For an explanation of what this means, check out this post I wrote awhile ago explaining magnitude and meaning behind market moves.

Bonds were mainly unchanged with US 10 year yields down slightly, and some upticks in European bonds, with UK Gilts falling 5 points to 2.17%

It seems the Yen has finally capitulated, with the USDJPY falling through daily support at 107:

yendaily

The strengthening Yen does not point to widespread USD weakness although AUDUSD continued to be bid up to 8770 this morning, bouncing off its 8620 to 8640 “bottom”, while Cable was largely unchanged itself, Euro has put on a significant bid in the last hour, up over 50 pips to nearly 1.2750:

Chart EURUSD, H1, 2014.10.13 20:58 UTC, VantageFX Pty Ltd., MetaTrader 4, Real
Gold strengthened its rebound rally too and is sitting just above its session highs at $1235 an ounce – I’m watching this more closely in the Asian session as it seems to be gaining in sentiment across this side of the world:

Chart XAUUSD, H4, 2014.10.13 20:52 UTC, VantageFX Pty Ltd., MetaTrader 4, Real

SPI futures indicate a reversal in fortune from yesterday, but the near 4% rally in spot iron ore will send local miners soaring. I’m looking closely at Fortescue (FMG) which had a significant bullish engulfing candle yesterday and could rally up to former support, now resistance at $4 per share:

FMGBULL

Some small local data today, with Guy Debelle from the RBA having a chat this morning at a conference, alongside the Roy Morgan weekly consumer confidence print, with NAB Business confidence at 1030 . Later tonight all eyes will be on UK CPI and PPI, followed by German ZEW sentiment survey which is expected to dive given the slowing confidence in the Euro powerhouse.

I’ll be closely following the move in Euro and Cable on these releases.

 

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