The XJO pushed higher yesterday following strong leads out of China and US Futures but still held the 6630 resistance. It seems the XJO could be breaking out of the Channel after pushing through the 6,604 resistance, but at this stage, we haven’t broken the 50 day MA and the 6,630 resistance level. With the Futures up today, we will likely test the 6,630 resistance again, if we break 6,630 the market will be looking bullish with targets around 6,750. Otherwise, we remain a little cautious as the current move higher is on hopes that a trade deal can be achieved, but if any news around trade or interest rates disappoints, market could fall strongly again.
US markets jumped higher. The Dow closed 372.68 points higher (1.41%) and the S&P 500 was up 38.22 points (1.30%).Most other major markets also closed higher.
The S&P 500 jumped through two key levels of resistance overnight to stall at 2,976. Investors welcomed a slew of positive news that eased the mood of markets. China officially announced early yesterday that they would come back to the negotiation table with the US early October. Also, Hong Kong protesting may be winding down and stronger than expected services PMI in China also indicated things may not be slowing as quickly as once thought. Brexit is also looking likely to be delayed again after MPs beat Borris Johnson, allowing a bill to block a no-deal Brexit. Overnight strong jobs numbers also helped the mood, but weak PMI numbers are still indicating headwinds are coming. Tonight we will see a broader read on employment in the US with non-farm payrolls and the official unemployment numbers. Also, Fed Chair J Powell will be talking which could give another hint on rates come September 18th.
XJO Implied Volatility fell 2.40% and closed at 13.667%. The US volatility fell 20.84% and closed at 16.27%.
Crude was up overnight and is consolidating between $60US and $50US a barrel.
Gold has pulled back slightly after news of China and the US getting back to the negotiation table.
Iron Ore is becoming a bit whippy around the 90.00US a tonne level.
The Aussie dollar pushed higher against the US and is back about 68.00.
News that China and the US are getting back to the table is welcomed by markets, but how long can it last? We have seen this happen a number of times since this dispute started last year. However, markets will likely now put their attention back on economic data and the FED which are expected to cut rates in a few weeks time. If Trump stays quiet on the trade front we will likely see market volatility come back a bit until the October tariff deadline.
ASX Update: CYBG Plc (CYB) slumped -20.3%, after the Company announced to increase its provisions for legacy PPI costs by 300-450m pounds. Whitehaven Coal Ltd (WHC) was down -9.3%, following a broker downgrade to Hold from Buy. Speedcast International Ltd (SDA) was down -3.0%, after Moody’s Investors Service downgraded SDA’s corporate family rating and backed senior secured term loan rating to B2 from B1.
Today’s trading. In Australia, data on foreign reserves to be published. In the U.S., change in nonfarm payrolls and unemployment rate data is anticipated.