Welcome to my daily Markets Musings.
You’ll see things are different from now on. That’s because the full note was approaching 2,000 words some days and I’m breaking it up into a number of reports on the Axi Blog each day now.
That way traders can subscribe to the Axi Blog easily and then cherry pick the yarns and markets of interest
Feedback always welcome
Market Summary (7.45 am Wednesday, July 25)
A day after China announced new stimulus measures to shore up its economy in the face of the looming trade war with the US (and because it already needed it) markets decided it was uber bullish news for Chinese stocks, metals and industrial commodities, mining stocks, and to a lesser extent the Aussie dollar.
The moves in metals and mining stocks, in particular, are eye-watering. IN London last night BHP rallied 5.73%, Rio was 4.75% higher, while Glencore, Anglo American and Vale were also sharply higher with gains of 5.61%, 5.63%, and 4.03% respectively.
That positivity, that she’ll be right China’s got this, permeated Asian, European, and to a lesser extent US markets. Indeed having looked biased toward 10,000 just a week ago the China A50 index is back at 12,000 and the Shanghai comp has had its best 3 day rally in 2 years. European stocks liked the moves with the DAX, CAC, and FTSE MIB all gaining more that 1%. In London, the FTSE 100 was up 0.7%
She’ll be right, nothing to see here.
US markets, already buoyed by Alphabet’s beat and futures move the previous afternoon, have proved more circumspect. Sure every sector on the S&P 500, save for consumer cyclicals, is higher. But the gain of 13 points, 0.48% is light on in terms of the global excitement. The Dow is more excitable with a 0.79% gain, but that’s a product of its construction. The Nasdaq 100 is at 7,406, up 0.47%, after making a new high at 7,475. The Russell 2000 is down 1.1%.
The wash up is that after the rally here of 38 points yesterday saw the ASX ride higher with the Asian move SPI traders have added another 13 points overnight.
To forex then and the Aussie is the clear leader among the majors with a 0.53% gain to 0.7419. In truth that just gets it back to where it was before the previous days drop of half a percent. Today’s CPI result will be important for the Aussie. The Kiwi is up 0.22% at 0.6799 while the Canadian dollar lagged a little given oil and the Ausies move – USDCAD is down just 0.14% at 1.3151.
Elsewhere the USD is mixed. It’s lost a little ground against the Yen with USDJPY at 111.17 as it consolidates Monday’s move and traders bet where there is a little BoJ smoke there’s fire. The Euro is largely unchanged at 1.1686 after weaker flash PMI’s in Europe were offset by a marginal disappointment in the US. And of course the Pound continues to take all news about Brexit positively. It’s up 0.35% after Theresa May said she is taking charge of Brexit negotiations. I haven’t verified it yet but Twitter reckons Mrs May also said the Brexit department is going to focus on preparations for Brexit no-deal.
To commodities and Copper was up 1.6% in HGc1 terms to $2.78 a pound. Gold is flat around $1224 and oil is higher. The narrative for last nights move being that Chinese stimulus and infrastructure spending will boost oil demand as it has in the past. WTI rose 0.85% to $68.47 while Brent was 0.38% higher at $73.33.
Bitcoin has had another stonking rally as the ETF hype feeds more speculation. Or is it speculation about an ETF feeds the hype. Doesn’t matter, same, same. Anyway, BTCUSD is up 6.63% to $8211 – up and through the $8100/50 resistance, I mentioned in my Crypto video yesterday.
US rates are a little higher with the 2 year at 2.64% and the 10 at 2.95%. The curve is at 31 points.
On the day the big event here in Austrlai for markets is the release of Q2 CPI. The Reuters poll says the market is expecting a 0.5% headline rate which will take the yoy rate to 2.2%. Similar quarterly expectations are held for the weighted median and trimmed mean measures which are expected to print 1.9% yoy. A big number would be a very big number for the Aussie and potentially rates markets. A miss shouldn’t change rates pricing but might undermine the Aussies overnight strength.
NZ trade is also out and tonight we get German Ifo business climate, conditions, and expectations. New home sales in the US may be of interest as well.
Have a great day.
Macro Stuff that affects everyone and everything – either today or eventually
Have a great day's trading.
Chief Market Strategist
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Ongoing rate curve repricing and risk asset reaction perfectly illustrate how worryingly reliant investors have become on easy money policies