Daily Market Reports | Mar 29 2010
By Greg Peel
There was some confusion in offshore markets on Friday night as vague news came through that a South Korean warship had been sunk by the North Koreans. Weekend news corrected the rumours to suggest the ship went down by itself without North Korean involvement, but not before US stock markets gave up an afternoon rally.
The Dow had been up 68 points on Friday before closing to be up just 9 points. The rise and fall was somewhat of a repeat of Thursday, in which the ECB president declared himself to be “very, very angry” about IMF involvement in the Greek rescue package. There was no change to that package on Friday as the EU meeting in Brussels concluded, but this time Jean-Claude Trichet painted on a smile and announced he was “extremely happy” with the plan. One could not tell if he had anything being pressed into his back at the time.
Wall Street's successive failure to rally would not have been helped by economic data releases on Friday. The first estimate of Q4 GDP had come in at 5.7% and was then revised up to 5.9%. Economists had expected the final revision to hold 5.9% or tick slightly lower but instead it fell to 5.6%. The final count on US GDP in 2009 was thus a 2.4% contraction.
The Michigan Uni fortnightly consumer confidence measure came in at 73.6, which was exactly the same as February's last survey and slightly ahead of expectation. The first March survey rattled Wall Street at 72.5 so this was a bit of a win, but realistically consumer confidence is failing to match the enthusiasm many stock market bulls feel for the US economy.
The euro managed to regain some ground on Friday on the ratification of the joint EU-IMF rescue plan for Greece. The US dollar index fell 0.7% allowing gold to reclaim US$1100 by rallying US$13.70 to US$1106.70/oz. Base metals were stronger with copper up 1.6%. Nickel was a stand-out, rising 4.6% as seasonal factors see a sudden reduction in inventories.
Oil was nevertheless spooked by the lower GDP reading and uninspiring consumer confidence, coming on top of the announcement of a surprise inventory build on Thursday. It fell US53c to US$80.00/bbl.
The SPI Overnight fell 2 points to ensure a tepid start to Monday's trade in Australia.
This week is a shortened one for most in the markets ahead of Good Friday. All “Western” markets are closed on Friday but in the US the stock market closes while the bond market remains open. The US unemployment numbers are also released on Good Friday.
Tonight in the US sees personal income and expenditure data and the Dallas Fed manufacturing index. Tuesday brings the Case-Shiller house price index and the Conference Board consumer confidence measure. On Wednesday the ADP releases its private sector unemployment data while factory orders and the Chicago purchasing manager's index are also released. Thursday sees vehicle sales and construction spending, along with the last of the round-the-world manufacturing indices for Thursday.
Thursday is performance of manufacturing day, starting in Australia then on to Japan and China and across to the UK, the EU and finally the US. The US ISM manufacturing index is considered by economists as a reliable leading indicator given it tends to bottom and begin recovering ahead of a similar stock market move. The low point in the ISM was in December 2008.
Having dipped somewhat this February from the January reading, economists became concerned a peak might be upon us. The index has dipped a couple of times within the recovery, but never in two consecutive months. Economists are forecasting a return to positive movement in March, which could help to allay fears of another stock market correction and signal ongoing strength.
Australia's economic week begins on Wednesday with building approvals, retail sales and private sector credit. Thursday brings the trade balance, the RBA commodity index and the TD Securities inflation gauge along with the manufacturing data.
Each of those releases will be closely watched by the RBA, which has been suggesting recently the speed of intended interest rate rises will be determined mostly by interim data. The RBA makes a rate decision on Tuesday after Easter.
There'll be another trickle of stocks going ex-dividend this week, and there's also quite a lot of data coming out of other major centres.
For further global economic release dates and local company events please refer to the FNArena Calendar.
FNArena subscribers can read more about the upcoming US ISM release via "Rudi's View: Why A Global Peak Could Be Near", published March 10.
