It’s shaping up to be a potentially big day for trading with major indices testing recent highs and big round numbers. The Nikkei
is on a tear again, building on a recent breakout and driving to test 20,000 while the Hang Seng continues to challenge 25,000 and the S&P 500 tests 2,400.
Overall, however, stock market action remains mixed and it’s unclear if these tests represent the start of a new upswing for stocks, or the last hurrah of a strong seasonal rally that has been underway for six months. The Dow skidded back under 21,000 while falling metal and energy prices has dragged the S&P/TSX down 0.6% and could weigh on Australia’s S&P/ASX in today’s trading.
Signals from the market remain mixed. Gold , the Japanese Yen and the Swiss Franc all spent the day under pressure with perceptions of political risk easing for now following the Macron French election win. On the other hand, recent big drops in metal prices suggests growing concern that the global economy and outlook for resource demand may be slowing. This prospect has also kept the pressure on resource currencies, particularly AUD and CAD.
Crude oil fell 1.0% Tuesday, continuing to bounce around between $45.00 and $47.00. Increasing Libyan production as its civil war winds down has taken the brunt of the blame but this should not have been a big surprise to traders. The bigger issue remains how long OPEC intends to extend production cuts at this month’s meeting. Six months may not be enough to pacify oil bears at this point. Late in the day, oil tarted to bounce back a bit on a big 5.8 mmbbl drawdown in API inventories.
Valeant Pharmaceuticals had a huge day posting a 25% plus gain. Traders applauded the company’s latest earnings report which saw the beleaguered company cut its debt, grow its cash position, and boost earnings guidance. The shares cleared their 50-day average near $15.00 but remain well short of their 200-day average near $23.50.
Today’s China inflation reports could spark significant trading action in stocks, commodities and resource currencies by offering additional insights into the health of the country’s economy.
NZD may also be active today as traders position ahead of tomorrow’s RBNZ meeting. Economic reports in the last month have been mixed with food prices falling and the dairy industry under threat from President Trump, but New Zealand manufacturing and employment strengthening. It then appears likely that the central bank will hold rates steady again and with NZD under $0.7000, overt threats by Governor Wheeler against the Kiwi Dollar could subside.
Walt Disney $1.50 vs street $1.41
Electronic Arts $1.81 vs street $1.63
Nvidia $0.85 vs street $0.68
Significant announcements released overnight include:
US API crude oil inventories (5.8 mmbbls)
Canada building permits (5.8%) vs street 2.8%
Germany industrial prodn 1.9% vs street 2.6%
Germany trade balance €25.4B vs street €21.5B
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
4:15 pm EDT FOMC Kaplan speaking
11:30 am AEST China consumer prices street 1.1% vs previous 0.9%
11:30 am AEST China producer prices street 6.7%
7:45 am BST France industrial production street 0.6%
9:00 am BST Italy industrial production street 2.5%
10:00 am BST Greece industrial production previous 10.8%
12:00 pm BST ECB Draghi speaking
10:30 am EDT US DOE crude oil inventories street (2.0 mmbbls)
10:30 am EDT US DPE gasoline inventories street 0.2 mmbbls
10:30 am EDT US DOE distillate inventories
12:00 pm EDT FOMC Rosengren speaking
5:00 pm EDT Wed RBNZ interest rate 1.75% no change expected
9:00 am NZST Thu