21 Nov 2014 AMC - Market broke new high as China cuts interest rates and ECB promising 'easy money'
Market Summary
European Markets Closing Prices
European
markets are now closed; stock markets across Europe performed as follows:
·
UK's
FTSE: + 1.1%
·
Germany's
DAX: + 2.6%
·
France's
CAC: + 2.7%
·
Spain's
IBEX: + 3.2%
·
Portugal's
PSI: + 2.5%
·
Italy's
MIB Index: + 3.9%
·
Irish
Ovrl Index: + 1.8%
·
Greece
ASE General Index: + 3.7%
Before Market Opens
S&P futures vs fair value: +17.90.
Nasdaq futures vs fair value: +35.00.
The S&P 500 futures trade 18 points above fair value.
Markets rallied across much of Asia. The People's Bank of China cut its deposit rate 25 basis points to 2.75% and its one-year lending rate 40 basis points to 5.60% after markets were closed. Elsewhere, Japan's Prime Minister Shinzo Abe dissolved parliament, as expected.
The S&P 500 futures trade 18 points above fair value.
Markets rallied across much of Asia. The People's Bank of China cut its deposit rate 25 basis points to 2.75% and its one-year lending rate 40 basis points to 5.60% after markets were closed. Elsewhere, Japan's Prime Minister Shinzo Abe dissolved parliament, as expected.
·
Economic
data was limited:
o New Zealand's Credit Card Spending increased
6.7% year-over-year (previous 4.5%)
------
·
Japan's Nikkei added 0.3% to remain near seven-year
highs. Exporters were a mixed bag as Toyota Motor slipped 0.1% and Sony Corp.
added 0.9%.
·
Hong
Kong's Hang Seng
saw its first gain in five sessions, climbing 0.4%. Casino names saw strong
gains as Galaxy Entertainment jumped 4.2% and Sands China rallied 1.6%.
·
China's Shanghai Composite rose 1.4% to end just shy of
three-year highs. Financials provided support with Industrial & Commercial
Bank of China rallying 1.4%.
·
India's Sensex climbed 1.0% to an all-time high.
Financials had a strong showing after a merger between two small banks. State
Bank of India and ICICI Bank gained 2.8% and 2.5%, respectively.
Major European indices trade higher
across the board after ECB President Mario Draghi said eurozone inflation has
become increasingly challenging and the central bank is ready to act fast if
current trends continue. The pledge to tackle falling inflation pressured the
euro to 1.2420 against the dollar, representing a 1.0% decline on the session.
The euro weakness reflects heightened expectations that the European Central
Bank will deploy a sovereign QE program.
·
Economic
data was scarce:
o Great Britain's Public Sector Net Borrowing came
in at GBP7.05 billion (expected GBP6.90 billion; prior GBP10.57 billion)
o Italy's Wage Inflation ticked up 0.1%
month-over-month (previous 0.0%) while the year-over-year reading rose 1.0%
(last 1.1%)
------
·
Great
Britain's FTSE is
higher by 1.2% amid broad strength. Miners lead with Anglo American, BHP
Billiton, Fresnillo, and Rio Tinto up between 4.5% and 6.1%. Tullow Oil also
displays strength, up 6.1%
·
Germany's DAX has added 2.2% with growth-sensitive names
in the lead. HeidelbergCement, ThyssenKrupp, and BASF are up between 3.6% and
4.6%. Adidas is the lone decliner, down 0.6%
·
In France, the CAC trades up 2.4% with all 40 components
in the green. ArcelorMittal and Cie de St-Gobain lead with respective gains of
5.2% and 5.4%
·
Spain's IBEX is higher by 2.7% amid broad gains.
Construction and engineering names lead with ACS, FCC, Sacyr up between 4.1%
and 7.1%.
U.S. Equities
·
Equity
futures are set to open at record highs, supported by more easy money policy by
global central banks
·
The
People's Bank of China cut both its lending and deposit rates
·
ECB
President Mario Draghi suggested the ECB will "do what we must to raise
inflation and inflation expectations as fast as possible"
o S&P Futures +17 @ 2069
o Dow Futures +146 @ 17,842
o Nasdaq Futures +34 @ 4279
Asia
·
Markets
rallied across much of Asia
·
The People's
Bank of China cut its deposit rate 25bps to 2.75% and its 1Y lending rate 40bps
to 5.60% after markets were closed
·
Japanese
Prime Minister Shinzo Abe dissolved parliament
·
Japan's
Nikkei (+0.3%) remained near seven-year highs
·
Hong
Kong's Hang Seng (+0.4%) saw its first gain in five sessions
·
China's
Shanghai Composite (+1.4%) ended just shy of three-year highs
·
India's
Sensex (+1.0%) climbed to an all-time high
·
Australia's
ASX (-0.2%) fell for the ninth time in ten sessions
Market Internals
The S&P 500 closed up 11 (+0.52%) at 2063, the Dow closed up 91 (+0.51%) at 17810, and the Nasdaq closed up 11 (+0.24%) at 4713. Action came on mixed volume (NYSE 1019 mln vs. avg. of 798; NASDAQ 1719 mln vs. avg. of 1856), with advancers outpacing decliners (NYSE 2111/1053, NASDAQ 1476/1294) and new highs outpacing new lows (NYSE 218/15, NASDAQ 137/49).
Relative Strength:
Latin America 40-ILF +5.21%, BRICs-EEB +4.48%, South Africa-EZA +4.38%, Steel-SLX +3.89%, China 25 Index-FXI +3.69%, Copper Miners-COPX +3.54%, Emerging Markets-EEM +3.19%, Rare Earths-REMX +2.45%, Coal-KOL +2.25%, Oil Services-OIH +2.12%.
Relative Weakness:
Natural Gas-UNG -4.4%, Volatility-VXX -1.97%, Swiss Franc-FXF -1.18%, Regional Banks-KRE -0.95%, Cocoa-NIB -0.63%, Corn-CORN -0.61%, New Zealand-ENZL -0.61%, British Pound-FXB -0.22%, Switzerland-EWL -0.12%, Netherlands-EWN -0.04%.
Leaders and Laggards
Technical Updates
Commentaries
Closing Market Summary: Stocks End
Upbeat Week On Higher Note
The major averages ended an upbeat week with modest gains despite pulling back from their early highs. The S&P 500 gained 0.5% while the Nasdaq Composite (+0.2%) underperformed.
The stock market—and specifically equity futures—donned their party hats in the early morning hours after two major central banks spiked the punchbowl. Most notably, the People's Bank of China announced its first rate cut in two years, lowering its deposit rate 25 basis points to 2.75% and trimming its one-year lending rate 40 basis points to 5.60%. The news boosted U.S. futures and European equities, while comments made by European Central Bank President Mario Draghi also contributed to increased risk tolerance.
Mr. Draghi served up another reminder that low eurozone inflation has become increasingly challenging and the central bank is ready to act fast if current trends continue. The euro (1.2390) responded by returning near its early November low, while the resulting greenback strength sent the Dollar Index (88.29, +0.70) to a fresh four-year high.
The Dollar Index finished near its best level of the day while equities endured a bit of a hangover following the early morning extravaganza. Despite the pullback, all ten sectors ended in the green with telecom services (+0.1%) bringing up the rear.
Cyclical sectors fared better than their defensively-oriented counterparts with commodity-linked groups posting solid gains. The strength in these areas could be traced back to the news of the rate cut in China that underpinned miners and steelmakers. Rio Tinto (RIO 47.51, +2.20) surged 4.9% while the broader materials sector (+1.3%) settled in the lead. As for steelmakers, the Market Vectors Steel ETF (SLX 41.08, +1.54) soared 3.9%.
Manufacturers of heavy machinery also rallied with Caterpillar (CAT 106.45, +4.36) jumping 4.3%. The Dow component gave a boost to the industrial sector (+1.0%), which ended among the leaders.
Also of note, the energy sector (+1.2%) rallied with help from crude oil, which rose 1.1% to $76.53/bbl. However, crude ended well below its early high in the neighborhood of $77.75/bbl.
Elsewhere, the consumer discretionary sector (+0.2%) could not hold its early gain amid weakness in select retailers. GameStop (GME 37.86, -5.67) fell 13.0% after missing earnings/revenue expectations and guiding lower while Gap (GPS 38.46, -1.68) lost 4.2% after reporting in-line with its warning from November 6 and lowering its earnings guidance for fiscal year 2015. High-beta sector components also lagged with Expedia (EXPE 84.69, -1.39) and Netflix (NFLX 360.28, -7.86) ending lower by 1.6% and 2.1%, respectively.
Similarly, technology (+0.2%) could only hold a slim portion of its opening advance with Apple (AAPL 116.35, +0.04), Intel (INTC 35.60, -0.35), and Microsoft (MSFT 47.96, -0.73) pressuring the top-weighted sector from its early high.
Interestingly, Treasuries spent the day in a steady advance from their morning lows. The 10-yr note ended at its best level of the day with the benchmark yield down three basis points at 2.31%.
Today's participation was ahead of recent averages with roughly a billion shares changing hands at the NYSE floor.
Monday's session will be free of notable economic data.
The major averages ended an upbeat week with modest gains despite pulling back from their early highs. The S&P 500 gained 0.5% while the Nasdaq Composite (+0.2%) underperformed.
The stock market—and specifically equity futures—donned their party hats in the early morning hours after two major central banks spiked the punchbowl. Most notably, the People's Bank of China announced its first rate cut in two years, lowering its deposit rate 25 basis points to 2.75% and trimming its one-year lending rate 40 basis points to 5.60%. The news boosted U.S. futures and European equities, while comments made by European Central Bank President Mario Draghi also contributed to increased risk tolerance.
Mr. Draghi served up another reminder that low eurozone inflation has become increasingly challenging and the central bank is ready to act fast if current trends continue. The euro (1.2390) responded by returning near its early November low, while the resulting greenback strength sent the Dollar Index (88.29, +0.70) to a fresh four-year high.
The Dollar Index finished near its best level of the day while equities endured a bit of a hangover following the early morning extravaganza. Despite the pullback, all ten sectors ended in the green with telecom services (+0.1%) bringing up the rear.
Cyclical sectors fared better than their defensively-oriented counterparts with commodity-linked groups posting solid gains. The strength in these areas could be traced back to the news of the rate cut in China that underpinned miners and steelmakers. Rio Tinto (RIO 47.51, +2.20) surged 4.9% while the broader materials sector (+1.3%) settled in the lead. As for steelmakers, the Market Vectors Steel ETF (SLX 41.08, +1.54) soared 3.9%.
Manufacturers of heavy machinery also rallied with Caterpillar (CAT 106.45, +4.36) jumping 4.3%. The Dow component gave a boost to the industrial sector (+1.0%), which ended among the leaders.
Also of note, the energy sector (+1.2%) rallied with help from crude oil, which rose 1.1% to $76.53/bbl. However, crude ended well below its early high in the neighborhood of $77.75/bbl.
Elsewhere, the consumer discretionary sector (+0.2%) could not hold its early gain amid weakness in select retailers. GameStop (GME 37.86, -5.67) fell 13.0% after missing earnings/revenue expectations and guiding lower while Gap (GPS 38.46, -1.68) lost 4.2% after reporting in-line with its warning from November 6 and lowering its earnings guidance for fiscal year 2015. High-beta sector components also lagged with Expedia (EXPE 84.69, -1.39) and Netflix (NFLX 360.28, -7.86) ending lower by 1.6% and 2.1%, respectively.
Similarly, technology (+0.2%) could only hold a slim portion of its opening advance with Apple (AAPL 116.35, +0.04), Intel (INTC 35.60, -0.35), and Microsoft (MSFT 47.96, -0.73) pressuring the top-weighted sector from its early high.
Interestingly, Treasuries spent the day in a steady advance from their morning lows. The 10-yr note ended at its best level of the day with the benchmark yield down three basis points at 2.31%.
Today's participation was ahead of recent averages with roughly a billion shares changing hands at the NYSE floor.
Monday's session will be free of notable economic data.
·
Nasdaq
Composite +12.8% YTD
·
S&P
500 +11.6% YTD
·
Dow Jones
Industrial Average +7.4% YTD
·
Russell
2000 +0.7% YTD
Commodities
Closing Commodities: Natural Gas Futures
Drop 5%
·
Natural
gas futures traded in the red all day today following a volatile week/changes
in weather outlook
·
At the
end of today's session, Dec nat gas fell 5% to $4.28/MMBtu
·
Crude oil
rallied to near $80/barrel, but lost steam in afternoon trade and closed 1.1%
higher at $76.53/barrel
·
Gold and
silver recovered some following mid-day sell-off
·
Dec gold
rose $7 to $1197.70/oz, while Dec silver rose $0.25 to $16.40/oz
·
Dec
copper rose 1 cent to $3.03/lb
Metals price action
·
Gold rose
$7 to $1197.70/oz
·
Silver
fell 25 cents to $16.40/oz
·
Copper
rose 1 cent to $3.03
Energy price action
·
Crude oil
rose $0.83 (+1.1%) to $76.53/barrel
·
Natural
gas fell 21 cents (-5%) to $4.28/MMBtu
·
Heating
oil rose 3 cents to $2.06/gallon
·
RBOB rose
2 cents to $2.40/gallon
Agricultural price action
·
Corn fell
2 to $3.71/bushel
·
Wheat
rose 9.25 cents(+1.7%) $5.47/bushel
·
Soybeans
rose 17 cents (+1.7%) to $10.2175/bushel
·
Ethanol
rose 11 cents (+5.6%) to $2.06/gallon
·
Sugar #11
fell 0.01 cents to 16.09 cents/gallon
Treasuries
Yields Edge Up in Choppy Trade: 10Y:
+07/32..2.312%..USD/JPY: 117.72..EUR/USD: 1.2384
The Week in Review
The Week in Review
·
Treasuries
lost ground amid a rather subdued week for the complex. Click here to see an intraday
yields chart.
·
A choppy
week saw yields unable to break out of their recent ranges.
·
Macro
headlines included the People's Bank of China cutting rates, ECB head Mario
Draghi discussing further easing, and Japanese Prime Minister Shinzo Abe
dissolving parliament and pushing back the consumption tax hike.
·
The
latest FOMC minutes were in-line with expectations. Key takeaways
from the minutes included some members wanted to remove the ‘considerable
time' language and that the staff inflation forecast was reduced as a
result of the decline in energy prices.
·
Economic
data was mixed.
·
PPI (0.2%
actual v. -0.2% expected), NAHB Housing Market Index (58 actual v. 55
expected), building permits (1080K actual v. 1040K expected), CPI (0.0% actual
v. -0.1% expected), existing home sales (5.26M actual v. 5.17M expected),
Philly Fed (40.8 actual v. 18.3 expected), and leading indicators (0.9% actual
v. 0.6% expected) all outpaced estimates.
·
Empire
Manufacturing (10.2 actual v. 12.0 expected), industrial production (-0.1%
actual v. 0.2% expected), capacity utilization (78.9% actual v. 79.3%
expected), and housing starts (1009K actual v. 1025K expected) all missed
expectations.
·
Up front,
the 2Y edged up +2bps to 0.513%. Action spent the entire week bouncing between
0.500%/0.550%, as it has since the end of October,
·
In the
belly, the 5Y added +4bps to 1.611%. the yield has spent much of the past three
weeks between 1.600%/1.650%.
·
The 10Y
rallied +3bps to 2.315%. The benchmark yield has been unable to break out of
the 2.300%/2.350% range.
·
At the
long end, the 30Y finished flat @ 3.021%. The yield on the long bond has spent
the past month trapped between 3.000%/3.100%.
·
A
slightly flatter curve developed as the 2-10-yr spread narrowed to 180bps.
The Week Ahead
·
There is
no data on Monday. Treasury will auction $28 bln 2Y notes.
·
Data
kicks off for the week on Tuesday with GDP - Second Estimate (8:30), Case-Shiller
20-city Index, FHFA Housing Price Index (9), and consumer
confidence (10). Treasury will hold a $35 bln 5Y note auction.
·
Wednesday's
data is heavy as the weekly MBA Mortgage Index (7), initial and continuing
claims, durable orders, personal income and spending, PCE
Prices - Core (8:30), Chicago PMI (9:45), Michigan
Sentiment - Final (9:55), new home sales, and pending
home sales (10) are due out. Treasury will auction $29 bln 7Y
notes.
·
Markets
are closed Thursday in observance of Thanksgiving Day.
·
On
Friday, U.S. equity markets will close at 1pm ET and the U.S. Treasury market
will close at 2pm ET.
On other news....
Currencies
Dollar Flirts with Best Close Since
June 2010: 10Y: +06/32..2.318%..USD/JPY: 117.71..EUR/USD: 1.2388
·
The
Dollar Index trades on session highs and is on track to post its best close
since June 2010. Click here to see a daily Dollar
Index chart.
·
EURUSD is -155 pips @ 1.2385 and is flirting
with its lowest levels in 27 months. The single currency has been
punished following early comments from ECB head Mario Draghi that
suggested the central bank will "do what we must to raise inflation and
inflation expectations as fast as possible."A close below 1.2375 would
be the worst since August 2012.
·
GBPUSD is -40 pips @ 1.5650 as action contends
with its own 14-month low. Participants have taken note of prior comments
from MPC member David Miles, which warned specific rate guidance is dangerous
as there are many unforeseeable developments that could change that path. Also
impacting trade was a disappointing net lending to individuals number. A finish
below 1.5630 would be the lowest since September 2013.
·
USDCHF is +120 pips @ .9700 as trade piggybacks
the weakness in the euro. Traders are watching the .9725 region closely as a
finish above there would be the best since May 2013.
·
USDJPY is -40 pips @ 117.80 as action slides off
seven-year highs. Today's selling has been exacerbated by the flight to risk
that developed in response to the People's Bank of China cutting both
its deposit and lending rates.
·
AUDUSD is +50 pips @ .8670 as trade lifts off key
support in the .8550/.8600 area. The hard currency climbed as high as .8722
after the PBOC announcement crossed the wires, but has surrendered a decent
amount of those gains. Aussie bulls hope to put in a close above .8650.
·
USDCAD is -65 pips @ 1.1240 as modest selling takes
hold for a second day. The pair probed 1.1200 support and the 50 dma following
the hotter than expected Core CPI (0.3% MOM actual v. 0.2% MoM
expected) reading, but has seen a bounce off the level.
Weekly Analysis
Technical Updates
Briefing's Commentaries
Week in Review: S&P 500 Posts Fifth Consecutive Weekly Advance
The stock market began the week on an unassuming note. The S&P 500 (+0.1%) added just over a point while the Nasdaq (-0.4%) and Russell 2000 (-0.8%) underperformed throughout the session. The benchmark index started under modest pressure, but was able to finish near its best level of day with help from countercyclical sectors. News from overseas contributed to the early weakness as Japan's preliminary GDP report for Q3 revealed the second consecutive decline (-0.4%; expected 0.5%), meaning the country is now in recession. The news gave an overnight boost to the yen, but the currency was back to unchanged against the dollar (116.20) by the start of the U.S. session. The yen weakened a bit during the session, sending the dollar/yen pair to 116.50.
The major averages ended Tuesday near their highs with the S&P 500 (+0.5%) registering its fifth consecutive advance. The benchmark index settled at a fresh record high while the Nasdaq Composite (+0.7%) outperformed after struggling on Monday. The Tuesday session began on a flat note, but the health care sector (+1.6%) quickly pulled away from its unchanged level thanks to significant strength in biotechnology. The iShares Nasdaq Biotechnology ETF (IBB) jumped 2.2% and contributed to the relative strength of the Nasdaq. In addition to drawing support from biotech, the Nasdaq received a solid boost from chipmakers after SunEdison (SUNE) agreed to acquire First Wind for $2.40 billion as part of a joint venture with TerraForm Power (TERP). Shares of SUNE soared 29.4% while the broader PHLX Semiconductor Index spiked 1.9% with all but two components registering gains.
Equities ended the midweek session on a lower note with Tuesday's leader—Russell 2000—pacing the retreat. The small cap index lost 1.1% while the S&P 500 surrendered 0.2% with seven sectors finishing in the red. The benchmark index slumped at the start due to notable losses among several heavily-weighted sectors. However, the S&P 500 was able to pull away from its late-morning low thanks to relative strength in consumer discretionary (+0.5%), consumer staples (+0.4%), and energy (+0.6%). Although the trio helped the S&P 500 recover from its low, the index could not complete its comeback as industrials (-0.3%), technology (-0.6%), and health care (-0.5%) weighed.
Thursday ended on a modestly higher note despite a cautious start. The S&P 500 added 0.2% while the Nasdaq Composite (+0.6%) and Russell 2000 (+1.1%) outperformed. Equities faced some pressure at the start after disappointing data from overseas led to profit taking in Europe. Specifically, China's HSBC Manufacturing PMI came in at 50.0, which represents the difference between expansion and contraction, while Japan reported a slim downtick to 52.1 from 52.4. As for the eurozone, Manufacturing PMI slipped to 50.4 from 50.6 and Services PMI fell to 51.3 from 52.3. The key indices began inching away from their lows right after the open and the cautious sentiment evaporated in a hurry after better than expected Existing Home Sales (5.26 million; Briefing.com consensus 5.17 million), Leading Indicators (0.9%; consensus 0.6%), and Philadelphia Fed Survey (40.8; expected 18.3) crossed the wires at 10:00 ET.
Next Week In View
Economic Commentaries
Economic Summary: No US data until
Tuesday; PBOC cuts rates
Upcoming Economic Data:
Upcoming Economic Data:
·
September
Case Schiller 20 City Index due out Tuesday at 9:00 (August was 5.6%)
·
September
FHFA Housing Price Index due out Tuesday at 9:00 (August was 0.5%)
·
November
Consumer Confidence due out Tuesday at 10:00 (October was 94.5)
Upcoming Fed/Treasury Events:
·
NY Fed
President Bill Dudley (voting FOMC member) to speak at 10:00
Other International Events of Interest
·
The
People's Bank of China cut its deposit rate 25bps to 2.75% and its 1Y lending
rate 40bps to 5.60% after markets were closed
·
ECB
President Mario Draghi suggested the ECB will "do what we must to raise
inflation and inflation expectations as fast as possible"
Jason's Commentaries
The market on friday just had boost in their price level as China cuts their key interest rates and the ECB promising easy money which is as equivilent to having another QE. It seems that the central banks in the whole world has ran out of ideas on how to stimulate their economy and everyone is turning to the monetary policies. Looking at Japan as Prime Minister Abe is going to stimulate the economy monetary policy(printing 10.3 trillion yen stimulus bill), fiscal policy and economic growth strategy to get Japan out of deflation, aiming for a 'reflation'. Also to note that Japan is sufferring from recession, one of the top GDP producer in the world. Now it will be interesting to see which countries are going into recession next.
The main leaders are the Energy stocks and Material Stocks while industrials were trailing behind. The main reason for the movements in energy stocks are the gain in oil prices for the past 2 sessions. We're going to have a OPEC meeting on Friday that will drastically affect the oil prices, which likely they will be looking to reduce oil productions so as to maintain oil prices.
Since the market has broken new highs again, this week is going to be a up week!
Market Call: FLAT to upside
Date: 24 Nov 2014
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