Global Markets Overview – 4/7/14

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By evan Lucas, IG Markets Strategist | April 7, 2014 9:29 AM EST

NFP miss and US earnings season

We saw an interesting reaction to the non-farm payrolls on Friday night, with a read of 192,000 - short of the consensus read of 200,000. However, it was the first time the ADP read and the official read had been with in 2000 of each other in over two years. It was also interesting considering the consensus print had been bid up on some calling for the possibility of 300,000 jobs to be added.

There was an interesting sell off on the NFP figures; the DOW and the S&P reversed morning gains to tumble into the close, but more interesting than that was the fact that emerging market currencies saw real pressure as the carry trade came under stress.

The Turkish lira, the Brazilian real and the South African rand all lost ground to the USD - this is likely to hit the commodities space this week considering the make-up of Brazil and South Africa's economies. Watch the moves in copper, aluminium and nickel over week as the carry trade sees a slight unwind. The market has been quite calm for the past month and equity and currency trading has been appealing; however this miss (although really the print was very positive) is likely to see volatility in the US increasing, adding more pressure to the carry trade. 

Tech glitches

What is also going to be fairly influential this week is the start of the US earnings season - of most interest are the companies listed on the NASDAQ. Tech stocks are taking a hammering in the US; last week it started in the bio-tech space, with some small and mid-cap players losing up to 50%. Now the risk-off sentiment is spreading to high-end high risk growth stocks such as Tesla, Facebook, LinkedIn, Amazon and Netflix. All experienced large sell-offs as the NASDAQ lost 2.6% and broke through theJune 2013 uptrend, the hundred day moving average, and saw a bearish divergence.

US earnings season starts tomorrow with Alcoa, however there is a growing feeling that last-quarter earnings are not going to measure up to valuations. Considering the macro data out over the January to March period and the fact that the market once more hit record all-time highs last week, will earnings back the prices? Is earnings season going to be the reason for a pull back?

I think the best way to judge how the US earning season is tracking is to watch the earnings from Visa and AMEX; consumer confidence has been strong over the past six months, though has spending kept up with the sentiment read?

Ahead of the Australian Open

The futures markets from Saturday were under pressure from the impact of US equity trading on Friday. That has filtered into the futures markets valuations and we are therefore calling the ASX down 35 points on the 10am bell (AEDT) to 5387.

This could be the fifth rejection of the 5400 to 5415 range, with minimal Australia data this week, China on holidays for the Ching Ming festival and Japan looking at the BoJ rates and policy statement. This might be the final rejection with a push-back to 5350 - even as much as 5300 points - as the bulls run out of steam.

However, there may be some moderation in the sell-off as iron ore futures once more correctly called the spot iron ore market with Fe62% moving slightly higher to 115.70, which saw the moves from the past two week consolidating. BHP's ADR is pointing lower, however the drop is less than the overall market is expected to fall by and may prop up what looks to be a broad-brush move.

Asian markets opening call

Price at 8:00am AEDT

Change from the Offical market close

Percentage Change

Australia 200 cash (ASX 200)

5,387.80

-35

-0.65%

Japan 225 (Nikkei)

14,867.50

-196

-1.30%

Hong Kong HS 50 cash (Hang Seng)

22,524.30

14

0.06%

China H-shares cash

10,137.10

27

0.27%

Singapore Blue Chip cash (MSCI Singapore)

362.30

-1

-0.30%

US and Europe Market Calls

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

WALL STREET (cash) (Dow)

16,428.30

-171

-1.04%

US 500 (cash) (S&P)

1,867.62

-25

-1.35%

UK FTSE (cash)

6,666.40

4

0.05%

German DAX (cash)

9,633.80

-16

-0.17%

Futures Markets

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

Dow Jones Futures (June)

16,351.50

-171.00

-1.03%

S&P Futures (June)

1,860.63

-25.25

-1.34%

ASX SPI Futures (June)

5,381.00

-38.50

-0.71%

NKY 225 Futures  (June)

14,927.50

-195.00

-1.29%

Key inputs for the upcoming Australian trading session (Change are from 16:00 AEDT)

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

AUD/USD

$0.9283

0.0049

0.54%

USD/JPY

¥103.340

-0.585

-0.57%

Rio Tinto Plc (London)

£33.88

0.72

2.16%

BHP Billiton Plc (London)

£18.95

-0.32

-1.64%

BHP Billiton Ltd. ADR (US) (AUD)

$37.65

-0.10

-0.27%

Gold (spot)

$1,302.95

15.40

1.20%

Iron Ore (62%Fe)

115.70

0.20

0.17%

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(Photo: / )
UK unemployment rates are now tied to the Bank of England governor Mark Carney's forward guidance. Rates will drop when jobless rates drop to below 7% (Photo: Reuters)
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