FYI | Sep 28 2007
By Greg Peel
It’s the last day of the quarter – today in Australia and tonight in the US – and traditionally fund managers will try to push the market higher to register positive quarterly returns and lock in any performance fees or bonuses coming their way, or simply provide the best picture for investors. Traders suggest this is already apparent on Wall Street, and should continue tonight.
The US Commerce Department last night announced August new home sales fell 8.3% to their lowest level in seven years. This was a very bad number, surprising even a market prepared for the worst, and thus it was fabulous news. The second quarter GDP growth figure was adjusted down from 4.0% to 3.8%, which is mildly bad so thus mildly good.
Jobless claims for the week actually fell by 15,000 to 298,000, again surprising the market, which was justifiably expecting job losses. No unemployment problem? This is fabulous news.
And so we continue on the good news/good news bent, as the Dow put on another 35 points or 0.25% to be 87 points shy of the 14,000 high. The S&P and the Nasdaq both rose 0.4%.
The oil price surged again last night, rising US$2.58 to US$82.88/bbl. Tropical Storm Lorenzo is expected to develop into a hurricane and cross the Mexican coast. The US dollar fell against the euro and pound again last night while rising against the yen. Following oil and the dollar, gold shot up another US$6.10 to US$733.80/oz. The Aussie dollar has hit lucky US$0.8800 and is now not very far from its recent high.
Base metal prices were relatively quiet, with zinc the only standout in London with a rise of close to 3%.
The SPI Overnight rose 19 points.
The news out of China yesterday was that the PBoC raised the mortgage rate to be 1.1 times the benchmark lending rate. It also increased the minimum down payment required on apartments. This is an effort by the Chinese government to cool the property market bubble which has been precipitated both by newfound wealth and by the population shift from the bush to the city. It’s a typical softly-softly from Beijing.
The respected analysts at GaveKal predicted the PBoC would be more inclined to come down on the property market than the share market, as property affects all urban Chinese but the share market still has a relatively low retail investment (albeit growing constantly). Hence GaveKal suggests Chinese shares have a ways to go yet before the government starts to deepen its concern. (See “The US Inflation Myth”; FYI; yesterday).
