Daily Market Reports | Jan 12 2010
By Rudi Filapek-Vandyck
Dow closed up 45.80 (0.43%) at 10,663.99. The S&P500 gained 2 points to 1146.98. The Nasdaq closed down 4.76 at 2312.41.
Global investors have used the traditional quiet time in between Xmas and the second week of January to take positions ahead of anticipated further gains for share markets and commodities in 2010. The direct result of this concerted move has been strong gains for most equity indices and commodities leading into the new calendar year.
The first week of January saw most equity indices add circa 2.5% and this has further pushed up overall market optimism. This has also translated into rather buoyant prospects for equities as far as technical chart patterns go. Chartists are reading positive signals from their screens these days, expecting further advances in the days ahead, possibly for the remainder of the month (at least).
One remarkable divergence, thus far, seems to be that equity indices in Europe (FTSE, DAX, CAC) have already managed to break through technical resistance levels, while indices such as the All Ords and ASX/200 are rapidly approaching their technical resistance levels (at 5000). Others, however, in particular among emerging markets such as South Korea, India and China, are not looking equally bullish on price charts.
Major indices in the US seem to have blue sky written in front of them and overall market optimism ahead of the corporate reporting season is as positive as ever. In fact, some market commentators are already asking questions whether the market is not getting ahead of itself (what’s new?) with the VIX at unusually low levels and with the balance between bears and bulls in the market at an all-time high in favour of the bulls.
Surely, these market indicators must act as warning signals when everyone else has “buy, buy, buy” on his mind?
Investors in Europe continued to take guidance from positive Chinese data released over the weekend with European shares closing in positive territory, albeit with small gains only. The French market, however, posted a minor loss. In the US, equities posted a rather sluggish opening of Monday’s trading session. Alcoa shares were bid all day as traders were punting on a positive surprise. Alas, Alcoa released its quarterly profit result after the closing bell and it disappointed. Top line growth was better than expected, but the bottom line (EPS of US1c) was not.
Market consensus was for a quarterly EPS of US6c. Alcoa shares are under light selling pressure in after market trade, but still higher.
In addition, Electronic Arts followed up with an unexpected profit warning. The shares are down more than 8% in after the market trading.
Keeping a lid on financials stocks was news the US President is considering a fee on financial services companies for inclusion in the budget plan he’s set to release next month as a way to cut the federal deficit. Further details about this plan have yet to be released. The irony about all this is that US financials are expected to grow their profits faster than any other sector in the year(s) ahead.
Following on from Friday’s disappointing labour market data, the US dollar remained under pressure. Some market watchers also cited increased speculation that the US Fed may extend its stimulus measures as a contributor. EUR/USD was trading at an overnight high of 1.4547, opening today’s session around 1.4520. GBP/USD touched a high of 1.6194 but later pared some gains to open marginally lower at 1.6113 and the USD/JPY opens at 92.00, trading weaker overnight.
No surprise thus the AUD enjoyed another positive session. The currency strengthened against major counterparts as the Chinese imports data continued to buoy the overall mood. AUD/USD peaked at a seven-week high of 0.9326 overnight. AUD/EUR opened Tuesday marginally lower at 0.6408, while AUD/JPY traded above 86.20 but quickly pared some gains to open lower around 85.70. AUD/NZD opens at 1.2533 after a choppy session overnight.
Under normal circumstances, one would have expected energy prices to benefit from continued USD pressure, but reality proved less simple overnight. Initially, crude oil rallied to a 15-month high at close to US$84/bbl, but ultimately WTI futures contract for January fell 0.5% to US$82.37 a barrel amid forecasts that cold weather in the eastern US will abate this week, curbing demand for heating fuel.
The intraday peak at US$83.95/bbl was the highest price level for WTI since October 2008. Analysts at BA-Merrill Lynch predict oil may rise to above US$100/bbl next year as the global economy improves. The analysts forecast prices will average US$78.50/bbl in the first half of this year.
Spot gold did manage to hold on to its gains, rising to a one-month high at US$1,152.10 an ounce (up more than 1%).
LME copper increased 1.4% to US$7568/t as imports of the metal into China, the world’s largest consumer, climbed for the second month in a row. Plus the US dollar declined, of course. Other base metal futures traded positive with zinc and aluminium increasing 2.1%, 2.0%, respectively. Nickel ended 0.1% lower, while Lead ended unchanged.
US corn and soybeans declined 0.1% and 1.1% on reports that rain might boost potential crop yields in Brazil and Argentina. Wheat rose 0.8% as the declining US dollar increased the appeal of the commodity. Sugar lost 2.8% on increasing sales by speculators after prices last week reached the highest level in almost 29 years. Palm oil futures were 1.6% lower.
Interestingly, traditional safe-haven sectors -telecom and utilities- are the only two sectors down this year, while consumer staples on Monday slipped into the red for the year.
And for what it’s worth: the excessively narcistic Simon Cowell has declared this season will be his last as a judge on “American Idol.”
SPI Futures (up 4) are suggesting the Australian share market will open rather catiously.
Greg Peel will be back by the end of this month.
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