Global Markets Overview – September 10, 2014

Equities retreated further with Apple's much anticipated iPhone 6 failing to inspire investors. Apple unveiled a range of new products but the excitement swiftly waned as the stock was sold off after having enjoyed some good gains. This wouldn't have come as a big surprise as the stock tends to fall following new product launches. Some would probably feel the pullback we are seeing this week has been coming for a while with US equities looking a bit overcooked and as the US dollar rallies across the board. The greenback has been rallying in anticipation of a more hawkish Fed and as US economic data has been showing some strong signs. Perhaps this is what has made the rally in US equities a bit surprising as generally the developments should have been negative for equities. As a result, global equities will face some real tests in coming sessions as investors debate whether to keep buying the dips.

Pounds and euro still likely to be sold

In the FX space, there were some interesting reversals particularly for the sterling and the euro. The sterling benefited from comments by BoE Governor Mark Carney who suggested a rate increase in Q2 of next year is consistent with the bank's CPI goal. However, he reinforced that any hikes will be gradual and limited. Carney also touched on the Scottish independence and suggested a currency union is incompatible with sovereign Scotland. These comments helped cable reclaim the $1.6100 handle while the single currency also managed to reclaim $1.2900 against the greenback. There is still a lot of uncertainty around the ECB's stimulus plans and with Mario Draghi set to speak later today, the market will be hoping some of the details will be fleshed out. Despite the recovery, I still feel strength will only be used by traders as an opportunity for fresh shorts.

AUD and yen struggle against greenback

A couple of currencies that lost further ground to the greenback were the AUD and JPY. AUD/USD dropped to $0.9189 and will be testing support in this region. Yesterday's disappointing Nab business confidence/conditions reading and the poor home loans data both weighed on the local currency. Additionally iron ore prices just continue to deteriorate which is not doing the AUD any favours. Today we'll have Westpac consumer sentiment and then of course jobs numbers tomorrow.

Meanwhile USD/JPY remains in a very good place and printed a new high just shy of 106.50. However this doesn't seem like it will help Japanese equities as we're currently calling the Nikkei down 0.6% at 15,654. The BoJ releases its minutes today and BoJ member Iwata will speak; should we receive further dovish comments then investors could be looking to take advantage of the pullback.

Iron ore and gold drop further

Ahead of the open, we are calling the ASX 200 down 0.4% at 5584. About 5.5 points worth of dividends come out of the market today with the likes of AGO, ARI, BXB, WOW, MND trading ex-div. Further drop for gold and iron ore will rattle some of the mining names. Recent US dollar strength will not bode well for some commodities and gold has been hit hard by this, dropping to a 3-month low. Weakness in AUD/USD could work out to be a bright spot for some currency sensitive stocks but the question will be whether this is enough to balance out the pessimism elsewhere.

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