ASX at the close

ScreenHunter_31 Jun. 04 16.42

Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets

It has been a swift recovery for the Nikkei after yesterday’s slump on the back of the disappointing GDP reading. There are three key issues investors are focusing on regarding Japan including the consumption tax hike, possibility of elections and the BoJ meeting. After yesterday’s Q3 GDP miss, shelving of the consumption tax hike certainly seems like a done deal. The only point of contention now is how long it will be shelved for, with speculation that it’ll be at least 18 months. The longer it is shelved for, the more positive this is likely to be on markets. However, regarding the election, this weak data presents some challenges and perhaps even reduces the possibility of snap elections. Analysts feel Abe will want a fresh slate and renewed energy to reach his economic goals. On the other hand, calling an election now could see his majority slip significantly. Regardless, the media is likely to continue to speculate around an election. We also have the BoJ meeting commencing today with no changes expected after October’s surprise easing. Pressure is likely to mount on monetary policy to do the job that fiscal policy is struggling to achieve. There is already some speculation the BoJ will announce around ¥2 to ¥3 trillion worth of easing and this will tie up nicely with a sales tax delay. This would then pave way for Abe to call snap elections. Having said that, USD/JPY has been steady all day and it’s clear traders are waiting for a catalyst, of which the next 48 hours should bring some clarity.

China property prices remain a concern

It is day two of the Hong Kong-Shanghai exchange link and activity is considerably lower than that which we saw yesterday. North bound activity has only seen around $3 billion of the daily $13 billion quota taken up and even less southbound. The Hang Seng and Shanghai Composite are both struggling with investors focusing on another round of weak property prices data. It is clear investors are struggling to find bright spots at the moment and the main central banks will have to be at the forefront of any risk rally. Locally, it has been another disappointing performance, with the market failing to hang on to early gains. Some had hoped the China Free Trade Agreement would lift some sectors today but this was short lived. The reality is we have iron ore prices at five year lows and investor confidence in the sector has dissipated. It’s the perfect environment for short sellers and strength is being taken advantage of as an opportunity to sell. From a price action perspective, the ASX 200 is now testing the 38.2% retracement of the rally from October lows to last week’s highs. This level comes in at 5386 and we could see some support around there. The AUD did not react much to the RBA monetary policy minutes as expected. However, RBA Governor Glen Stevens speaks later today at the Committee for Economic Development of Australia (CEDA) annual dinner. Perhaps we might hear some commentary on the AUD which might cause some volatility.

Euro likely to remain under pressure

Ahead of the European open, we are calling the major bourses mildly firmer with a dovish ECB keeping investors encouraged. The euro slipped and equities firmed yesterday after Mario Draghi said an expanded purchase program could include government bonds (something investors always want to hear) and added the economic outlook is increasingly sobering. While Mr Draghi maintained his usual ‘whatever it takes’ rhetoric, his emphasis that the governing council was unanimous in its support was significant, given recent rumours suggesting he is growing increasingly unpopular in his camp. The ECB also seems to be ramping up its covered-bond purchases after raising this to about €10.485 billion last week. All up, this suggests traders should continue to expect a significantly weaker euro. In recent times we have learnt not to fight central banks, as seen with the Fed and BoJ, and all roads currently lead to a depreciating euro. I continue to feel selling EUR/USD into strength is a logical step and in the near term, November lows around $1.2358 are likely to be tested. On the calendar today, we have ZEW economic sentiment readings along with some ECB commentary to keep an eye on. In the UK, we have CPI data although after the inflation report last week, today’s reading is unlikely to be a big market mover.

Comments

    • Those buggers always have convincing narrative don’t they. So they think capitulation has happened in slow mo?

      I was stopped out of my gold short just over a week ago, but I did OK.

      I think last Fridays uppercut was a strong one & all I can do is trade what I see leaving me with a long bias short term.

      PDN – Strange beast…. More Vol on up days…….. just got to get that 200ma to turn up & break .455c resistance & it might be a good’un again?

      Edit:- You’ve probably seen this……….. http://www.marketwired.com/press-release/paladin-energy-ltd-quarterly-activities-report-for-period-ending-30-september-2014-tsx-pdn-1958675.htm

      What’s their breakeven price?

      • Nudge, ignore the narrative and just focus on backwardation. Why shouldn’t you, or anyone else really, sell gold short and use the proceeds to buy gold futures which will deliver more of the same gold in a few months, and keep the difference?

        Uranium spot is now up a whopping 57% in the last 4 months. But both PDN and ERA are badly lagging, not to mention SLX. Usually, miners should outperform the underlying commodity they produce by a large margin (on the way up).

      • will deliver more of the same gold in a few months, and keep the difference?

        Presumably because the future gold price will be even lower – you know, like the last two years…

      • “Presumably because the future gold price will be even lower”

        Mig, but that makes it even better, not worse, for shorts.

      • Yes, Nudge, I saw it. They need the spot to be about $80 to break even.

        At the current spot price, uranium miners are still making losses. This is why uranium miners have been trading well below their NTAs – because their NTAs have been going backwards as they kept making losses. There is no reason for them to trade below their NTAs if they were making profits!!

        Since the end of July, they have been making smaller losses than before as the spot recovered.

      • Nice point Dumpling.

        I’ve been playing OTC spot since I was MF’d. Might be time to get into a well regulated establishment sponsored house again….. Who to trust?

      • Forget about shorts for now, Nudge. Gold just shot up above 1200.

        Still, my question remains. Why didn’t shorts pile in given the backwardation?

      • IIRC backwardation has been pointed to a few times this year & the price has come down – they want it now (demand?) & yet the price is in a general downtrend. I can’t afford to fuzz my mind up with something I can’t make sense of, I just follow the jagged line.

        The ST chart says long! LT I’m still short biased till at least a higher low, & the 200dma is still well above current price…………… The rest is in the timing & risk management.

        Buy stop triggered @ $1190 SL $1180…………. 1/2 contract. Do I take it or sleep on it?

  1. People can summarize a complex scene in a few words without thinking twice. It’s much more difficult for computers. But we’ve just gotten a bit closer — we’ve developed a machine-learning system that can automatically produce captions (like the three above) to accurately describe images the first time it sees them. This kind of system could eventually help visually impaired people understand pictures, provide alternate text for images in parts of the world where mobile connections are slow, and make it easier for everyone to search on Google for images.

    One for the weekend tech section

    http://googleresearch.blogspot.com.au/2014/11/a-picture-is-worth-thousand-coherent.html?m=1

  2. The Traveling Wilbur

    Joseph Benedict “Joe” Hockey’s “U Can’t Touch This” [Budget]

    You can’t touch this
    You can’t touch this
    You can’t touch this
    You can’t touch this
    You can’t touch this

    My, my, my budget hits them so hard
    Makes them say “Oh my Lord”
    Thank you for blessing me
    With a mind to grind to their bare feet
    It feels good, when you know you’re down
    A super dope homeboy from the North Town
    And I’m known as such
    And this is a budget, uh, you can’t touch

    I told you homeboy (You can’t touch this)
    Yeah, that’s how we living and you know (You can’t touch this)
    Look at my eyes, man (You can’t touch this)
    Yo, let me bust those funky line items (You can’t touch this)

    Fresh new razor gangs, advance
    You gotta like that, now you know you wanna dance
    So move, outta your seat
    And get them fly papers and catch this beat
    While it’s rolling, hold on
    Pump a little bit and let ’em know it’s going on
    Like that, like that
    Cold on a mission so cut them back
    Let ’em know, that you’re too much
    And this is a budget, uh, you can’t touch

    Yo, I told you (You can’t touch this)
    Why you standing there, man? (You can’t touch this)
    Yo, sound the bell, parliament is in, sucka (You can’t touch this)

    Give me a cigar, or tax their petrol
    Make ’em sweat, that’s what I’m giving ’em
    Now, they know
    You talking about the Hockey you talking about a show
    That’s hype, and tight
    Voters are sweating so pass them a wipe
    Or a tape, to learn
    What’s it gonna take in the 10’s to burn
    The pre-election promises? Legit
    Either take a redundancy or you might as well quit

    That’s word because you know…

    You can’t touch this
    You can’t touch this
    You can’t touch this

    Break it down! (Music breaks down) Stop, Hockey time!

    Yeah… (You can’t touch this)
    Look, man (You can’t touch this)
    You better get hype, boy, because you know (You can’t touch this)
    Ring the bell, parliament’s back in (You can’t touch this)

    Break it down! (Crazy bridge) Stop, Hockey time!

    You can’t touch this
    You can’t touch this
    You can’t touch this
    You can’t touch this

    Break it down! (Nice cigar, Hockey) Stop, Hockey time!

    Every time you see me
    The Hockey’s just so hype
    I’m dope on the parliamentary floor and I’m magic on the mic
    Now why would I ever stop doing this?
    With others making forecasts that just don’t hit
    I’ve bought IPs around the world, from London to the Bay
    It’s “Hockey, go Hockey, JB Hockey, yo Hockey”
    And the rest can be the ones who pay

    You can’t touch this