Morning Market Wrap:
Overnight Markets:
We are seeing a consistent amount of chop as the week goes on. Last night was no exception, with a push early in the session, only to see a sell-off and a close around session lows. The Dow had the worst showing:
- Dow: -0.51%
- SPX: -0.27%
- Nas: -0.18%
NVDA will announce earnings after close tonight (we will wake up tomorrow with their given result), so markets also have this to consider; they will move markets if the outcome is variant, for sure.
Macro and Metals:
Silver and gold both chopped around with the market. Gold tried to breach that $1900 level but failed, closing at $1897, up about $2 from the Aus session close. Silver closed at $23.39, up about 9 cents from the Aus session close.
Base Metals:
Most base metals (and most China-related things - we will get to that) had an okay day. Ni was up +2.39%, Cu up +1.05%, and Al up +1.73% (after yesterday's dip through the downside level - that's a big surprise for anyone using that level as a stop loss or entry - another reason charts can be unreliable). Tin also had a decent showing, up 1.86% on LME - about 3 days now, rounding up on Tin after the recent sell-off.
Energy and EV:
The main focus was on iron ore, seeing a decent surge, cracking back above 800 CNY and closing at 810 (yesterday we were far away from 800 at 777, so there is some scale on the push - roughly 4.5% from when I spoke about it yesterday). It's now sitting at prices not seen since March, almost 6-month highs. This move is mostly attributed to the expectation of more stimulus out of China, so just remember - when/if it does come, be aware of where assets have come from and what they had priced in. After a move like this, it could be a "sell the news" event. Oil also continued its chop, trading down about 0.6% on the WTI Sept contract. Natty gas showed a back-and-forth movement, ending the day with a close down 2.77%, and NEWC Coal on the Sept contract was up 1.85%. Coking Coal followed the upward trend of Iron ore, up 3.32%. Another mover yesterday was the reversal of Lithium futures. After an intraday high of about 340 (+9%) in the first two prints of the session, they sold off throughout the session, closing down by 4.11% at 210. Given its volatility, it's hard to make predictions on counter-trend (downward) moves. Uranium was stable for the second day straight, after its recent good showing. US names cooled off a little after a two-day push. I'm really looking forward to seeing the Uranium price rise again to support the continued upward move in uranium names. The Australian session will be the sector to watch.
Local:
Aus futures are on a negative lead-in of -17pts after yesterday's ambitious chop. There was an attempt to push, but the market got sold into. The main focus yesterday was Uranium names, all having a solid second-day push after Monday's late sell-off. They all gapped up and continued yesterday. US names (as mentioned above) cooled off a little but still held. It's a hard situation up here at the moment, as if we get a push in yields (as I keep banging on about), Uraniums without the support of a continued push in the Uranium price often act as a market proxy and get sold off with the market. The risk is there. Not saying it will happen, just pointing out the risk after a solid move. In any case, it could be a really great entry point for anyone who missed the boat on the move thus far. Market drag against a commodity price move higher, which leads me to Iron ore names. This seems to be the case with the likes of FMG, RIO, VALE, etc. Due to the weakening market and their status as large caps, we've seen them being held back against the price upswing for a few days now. Seeing Iron ore above 810, at some point there will have to be a higher push in Iron Ore producers, especially the pure plays like FMG. We did see VALE, against the grain (and relatively the weakest in recent times in the sector), hold a 3.1% up move on the DR listing in the US, closing on highs. For a name that has been so weak for so long, that's a good sign for today (albeit with concerns about overall market drag with futures down) in Iron ore names. It feels like another opportunity where if the Dow was up 200 points, we would see FMG closing up by some 5%+ on the session. But with that index drag, it makes it hard. AKE reported yesterday and finally had a green day on a report day (lol), with PLS also trying (they report tomorrow, so be aware). I would personally like to have a long-short book, betting short on Lithiums short-term against Iron ore names, but with earnings risk, it's just not something I'm willing to do. With the rollover in Futures, I feel the market might be looking to sell rallies and roll funds into other growth areas (uranium possibly?). Just on that, the long uranium story has been the same for a solid 2 years without really seeing much movement in pricing. Once the price moves, maybe that's the final piece of the puzzle... We'll see if that keeps on keeping on!
Data (Syd Time):
Today at 9 am local time, we have some Aus flash manufacturing and services numbers. Both are decent numbers, more so the services numbers, as we are a services-based economy, so obviously the services numbers will affect us the most. Keep an eye out there for any variance. UK Flash services numbers are at 6:30 pm, and flash manufacturing and services numbers out of the US at 11:45 pm. Flash numbers are the first set of numbers in the PMIs; later on, we have a more honed number with the "Final," so flash numbers tend to have more market impact (although the finals can too, especially if variant). Be aware of these numbers tonight. Don't forget Powell's speech on Friday after the Jackson Hole Symposium.
Think that's about it.
Hope you all have a great day.