Our XJO rose on the back of yesterday’s interest rate cut from the RBA, as well as positive futures markets in the northern hemisphere. The RBA cut rates to a record low 0.75%, which the market seemed to applaud. Regardless, rates are being cut because of weak economic fundamentals, and the cut hasn’t stemmed a large XJO futures fall overnight. Technically, the XJO is just below some resistance at 6,750, but should fall towards support at 6,680 on open this morning. If 6,680 breaks, the next level of support is 6,630. The XJO also appears to be in a broad pennant pattern, so watch for a break of either the longer-term uptrend line, or the shorter-term downtrend line as an indication of the next directional move for our market.
Nufarm Ltd (NUF)was up further +15.2%, after Macquarie Bank upgraded recommendation on the stock to Outperform from Neutral and raised the price target to A$6.56 from A$5.3, on the back of Company’s plans to lower its debt burden through its asset sale deal of crop protection and seed treatment units in Brazil, Argentina, Colombia and Chile to Sumitomo Chemical for A$1.188bn.
US markets closed significantly lower overnight on weak manufacturing data. The Dow closed 343.79 points lower (-1.28%) and the S&P 500 was down 36.49 points (-1.23%). European markets also closed lower, whilst Chinese markets were closed for a national holiday.
US markets fell significantly on weak manufacturing data, which added to concerns of an economic slowdown amid the US-China trade war. On top of this, a protester in Hong Kong was shot with live ammunition by police, an escalation that is likely to also concern markets. Technically, the S&P500 broke below the 2,960 level support level and fell immediately to the next level of 2,940, if that breaks, the next support is quite a way away at 2,840. The index now appears to be forming a downtrend, after failing to break resistance at all-time highs, a move that has also created a double-top pattern.
XJO Implied Volatility fell 4.06% and closed at 12.65%. The US volatility was up 13.42% and closed at 18.56%.
Crude fell overnight on trade war concerns, but has since bounced a bit in the Asian session.
Gold rose a bit due to the uncertainty, but has started to pull back a little.
Iron ore was flat overnight and is trading between support at $90USD a tonne, and resistance at $100 USD per tonne.
The Aussie dollar fell after the rate cut and is trading around 67 US cents.
The XJO appears poised to react to global uncertainty today, primarily the US manufacturing data and the shooting of a protester in Hong Kong. Whilst the market loved yesterday’s rate cut, a lot of it was likely priced in, and the market has a short memory regardless. Overall, share prices are still incredibly high, and with plenty of ongoing uncertainty there is plenty of risk to the downside. Further interest rate cuts and a possible US-China trade deal at the end of the month could spur things higher, but with traditional methods of valuing shares all pretty much at record highs, it appears risk is skewed to the downside.
Today’s trading. In the U.S., data on MBA mortgage applications and ADP employment change to be published. In Japan, monetary base data is anticipated. In the U.K., data on Markit/CIPS UK construction PMI is anticipated.