Daily Market Reports | Nov 25 2010
By Greg Peel
The Dow jumped 151 points or 1.45 while the S&P gained 1.5% to 1198 and the Nasdaq added 1.9%.
It was all quiet on the 38th parallel last night. It transpires that indeed South Korea did fire first – as part of a scheduled training exercise. Shells were lobbed harmlessly into the sea, but North Korea claimed it to be North Korean sea. You kill our fish, we bomb your children.
Nor was there any new activity in Ireland. Wall Street took no new news out of both fronts to be a chance to relax and feel happy about the Thanksgiving holiday at hand. A massive protest rally is planned for the streets of Dublin on Saturday, but we'll let that pass.
There was actually good news out of Europe for a change. The UK third quarter GDP was revised and remained steady at the earlier 0.8% assumption which had been an upside surprise at the time. And despite potential Irish ramifications, the German IFO index of business sentiment surprised by jumping to 109.3 from 107.7 in October when economists had expected a fall to 107.6. Maybe the German business community is heartened by Merkel's moves to reintroduce a parallel Deutschmark.
Not that they should be. The single euro has been instrumental in landing the PIIGS in debt hot water given the spending power it provided which would never have been reflected in original local currencies. The PIIGS have ridden off the strength of northern Europe. But the flipside is that southern Europe has dragged down the value of the euro, making German exports cheaper. So just as China's currency is artificially undervalued to provide it with an export advantage, so too is Germany's. All part of the global imbalance.
So there was not a lot of reason to sell on Wall Street last night, and with the release of the weekly jobless claims number, there was every reason to buy, apparently. New jobless claims fell by 34,000 last week to 407,000 when economists had expected 435,000. I've said it before and I'll say it gain – these numbers are notoriously volatile – but it does seem recently that the trend has been more favourable. That's the lowest total since July 2008. There is still some way to go, nevertheless, to move the unemployment rate dial.
So everything that was down on Tuesday was pretty much up last night and vice versa. Stock indices returned to previous levels, but there was not a lot of symmetry elsewhere.
The euro, for example, still ticked lower, sending the US dollar index up slightly to 79.78. The Aussie risk indicator, however, reversed more than half of its loss to US$0.9831. Gold fell back only US$1.60 to US$1374.20/oz.
Oil exploded back to the upside having only ticked down slightly on Tuesday, jumping US$2.61 to US$83.86/bbl. The dollar had started the session weaker which sparked a return to commodity interest. Base metals jumped 2-4%.
The US ten-year bond yield, which only fell about 4 points on Tuesday, jumped 15 points to 2.91%. But the big sell-off was encouraged by weak demand for the Treasury's auction of US$29bn of seven-year notes.
It was all about the data last night though, with jobless claims leading the charge. It is nevertheless curious as to just how selective Wall Street can be in choosing which numbers to respond to.
The Michigan Uni fortnightly consumer sentiment survey came in at a five month high 71.6, up from 67.7 last time and ahead of 69.5 expectations. This was seen as great news ahead of Black Friday, and to top things off high-end discretionary retailer Tiffany's posted a strong third quarter result which saw its shares jump 5%.
Personal incomes were up for the fourth month in a row in October, by 0.5%, while spending increased 0.4%. Looks good, except that economists had expected 0.4% on the incomes but 0.6% on the spending.
And then on the other side of the coin, the FHFA house price index for September fell by 0.7%. The August gain of 0.4% was revised down to flat. House prices fell over the September quarter by 1.6%.
Durable goods orders fell 3.3% in October following their shock 5.0% gain in September. Economists had expected only a 0.3% fall. But we recall that lumpy transport orders greatly exaggerated the September number, so was the reverse true? Well transport did fall 5.2%, but ex-transport fell 2.7%. The headline number represented the biggest fall since January 2009.
The SPI Overnight was up 38 points or 0.8%.
Today in Australia sees the important private sector capex data from the September quarter – a big factor in RBA thinking. Tonight in the US is the Thanksgiving holiday and all US markets are closed.
This means a probably a brief Overnight Report tomorrow, but you never know.
[Note: All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.]
