Following on from yesterday’s Asia Pacific trading, stock markets in the US and Europe were unable to maintain yesterday’s upward momentum and have slumped back in a normal trading correction.
News flow and trading action have mainly centred around earnings today. BHP dropped 5% in US trading in reaction to yesterday’s big loss and dividend cut but it’s hard to tell how much of today’s drop in base metal stocks was due to that and how much was because after posting 8-12% gains on Monday, the sector was due for a correction anyway.
Meanwhile, the response to US retail earnings was positive with Macy’s gaining 5% and home Depot advancing 1.5%. Canadian bank stocks had a mixed day following better than expected earnings out of Bank of Montreal and National Bank. Gains for gold miners, however, helped to cushion the S&P/TSX to outperform its peers falling 0.3% less than the Dow’s 1.1% loss.
Crude oil fell back 4-5% today as hopes for a deal to cut production continued to fade. Iran apparently called the recent proposal to freeze production “ridiculous” (which it is for them while ramping production back up to pre-sanctions levels). Meanwhile Saudi Arabia’s oil minister indicated that no production cuts are planned only the freeze at January levels the country has conditionally agreed to. After the US close a much larger than expected API inventory increase drove WTI back under the $30.00 level.
Overall, today’s declines in stocks and oil have been moderate relative to recent gains suggesting that this has been a normal trading correction as base building continues following the big selloff that kicked off 2016.
There have been some defensive capital flows today with gold rallying within its current consolidation range, JPY advancing on its previous highs and CHF climbing, the latter two despite recent efforts by their central bankers to talk the currencies down or at least cap their rallies. Resource dollars like CAD, NZD and AUD have been falling with traders going risk off for now but this could easily change again. GBP remains under pressure falling toward $1.4000 against USD as initial concerns over the Brexit vote overhang Sterling but a lot can happen in terms of trading between now and June.
For today’s Asia Pacific trading, the rising Yen could impact the Nikkei
once again. Australian stocks could see mixed action between gold and base metal miners and we may see if BHP related weakness has run its course or not. Mid-tier data for Australia, China and Singapore may also influence trading. China’s Yuan upward fix yesterday became the excuse which sparked the global pullback so today’s setting may be watched closely by traders and could influence trading in China sensitive markets.
Comments this evening from Fed Vice-Chair Stanley Fischer may also have an influence on trading. Last week’s testimony from Fed Chair Yellen appeared to be designed to keep the central bank’s options for its March meeting. Dr Fischer has been shifting toward a more dovish stance from where he started back in January any change from him could influence FOMC speculation trading with the March decision only three weeks away.
First Solar $1.60 vs street $0.77, sales $942M vs street $929M, guides 2016 EPS to $4.00-$4.50 vs street $4.08
Significant announcements released overnight include:
US API crude oil inventories 7.1 mmbbls vs street 0.56 mmbbls
US consumer confidence 92.2 vs street 97.2
US Richmond Fed (4) vs street 2
US existing home sales 5.47M vs street 5.33M
Germany GDP 2.1% as expected
Germany exports (0.6%) vs street (0.3%)
Germany imports 0.5% vs street 0.3%
Germany construction investment 2.2% vs street 0.6%
Germany private consumption 0.3% as expected
Germany IFO bus climate 105.7 vs street 106.8
Germany IFO current assessment 112.9 vs street 112.0
Germany IFO expectations 98.8 vs street 101.6
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)
TBA US Nevada Republican caucus results
8:30 pm EST FOMC Fischer speaking
11:00 am AEDT Singapore GDP street 1.8%
11:30 am AEDT Australia wages growth street 2.3%
11:30 am AEDT Australia construction work street (2.0%)
12:45 pm AEDT China consumer sentiment previous 114.9
9:00 am GMT Norway unemployment rate street 4.6%
9:00 am GMT Italy industrial sales previous 0.8%
9:00 am GMT Italy industrial orders previous 12.1%
11:00 am GMT UK CBI sales street 12 vs previous 16
8:00 am EST FOMC Lacker speaking
9:45 am EST US flash service PMI street 53.5 vs previous 53.2
10:00 am EST US new home sales street 520K
10:30 am EST US DOE crude oil inventories street 0.52 mmbbls
10:30 am ESGT US DOE gasoline inventories street (1.0 mmbbls)