Daily Market Reports | Jan 21 2011
By Rudi Filapek-Vandyck
The DJIA fell 0.2% to 11806, the S&P 500 fell 0.3% to 1278, and the Nasdaq declined 0.9% to 2702.
As flagged in yesterday's story, the world held its breath until Chinese economic data for the December quarter were released on Thursday, and investors didn't like what they saw. High inflation in combination with an apparent acceleration in economic growth: in a different context and at a different time, this would have been wonderful news. In the present context of a tightening central bank and with authorities in Beijing worried about too much growth and too much speculation, it makes for a fearful combination. And so it was that Asian and European markets sold off and Wall Street did the same at the open.
A positive result from Morgan Stanley plus economic data that triggered enough optimism delivered sufficient fuel for the buyers to move back into the market again. At the close, minor losses were all that remained. After the closing bell global technology players eBay and Google delivered positive results. The latter seems to have announced a corporate shake up too. Plus Hewlett Packard has announced some serious reshuffling at the board level too.
US existing home sales soared by 12.3% to an annual rate of 5.28 million, far surpassing forecasts for a rise to 4.85 million. However, it has to be noted most of these gains appear to have taken place amongst lower priced assets, which assists the bears in largely dismissing the release. US jobless claims fell by 37k to 404k over the past week and that was a clear positive. The Philadelphia Fed Index, on the other hand, eased from 20.8 to 19.3 in January. Buyers took heart from the fact that underlying sub-components of the index like new orders and shipments appeared positive. The Conference Board's leading index rose by 1.0% in December, no doubt helped by the fact that a rising share market is one of its key components.
US equities managed to limit losses on Thursday (Friday morning in Sydney) but commodity related stocks had another bad day with the likes of Freeport McMoran losing 4%. Earlier on the day, trading on the LME saw base metals take a bath, on further fall-out from the Chinese data and both crude oil and gold equally suffered another tough session.
The Australian SPI 200 March 2011 futures contract was suggesting the market will open 51pts or 1.1% lower at 4784 immediately after the close of US equity markets, but the SPI has been improving since, suggesting more benign losses at the market's open.
No wonder, the Aussie dollar did it tough in overnight trade. Adding to the headwinds was a strengthening USD on the back of the above mentioned "upbeat economic data". In Asian trade this morning, AUD has bounced off the overnight lows. AUD opens at .9880, AUD/EUR opens at .7336, AUD/GBP opens at .6210, AUD/NZD opens at 1.3024 and AUD/JPY opens at 82.02.
US crude oil prices fell for a third straight session on Thursday following an unexpected rise in weekly oil inventories. EIA data showed that US crude stockpiles rose by 2.62 million barrels against market expectations for a 400,000 barrel drawdown. The rise in inventory was the first in seven weeks. The Nymex crude oil contract fell by U$2.00 to US$88.56 a barrel. And London Brent crude contract fell by US$1.40 to US$96.76 a barrel.
As stated earlier, base metal prices faced more sellers than buyers on the London Metal Exchange. China data/concerns plus a rise in the US dollar proved a lethal combination on the day. Nickel and tin, however, managed to buck the trend by adding small gains.The Comex gold futures price dived US$23.70 an ounce to US$1,346.50/oz.
Agricultural commodities were broadly higher in overnight trade, bucking the sell off that dominated most other markets. Corn rose 2%, while gains in wheat (+0.8%) were capped after the International Grains Council raised its 2010-11 global wheat crop forecast. Sugar prices recovered to finish 0.4% higher; earlier after prices dipped on the back of a strong production forecast from an influential research house. Soybeans rose 0.2%, Palm oil was flat, and canola oil decreased 0.8%.
US treasuries fell on Thursday (yields higher) following a weak bond auction. The $13 billion sale of 10yr TIPS was met with lacklustre demand. US 2yr yields rose 5pts to 0.63pct and US 10yr yields rose 10pts to 3.45pct.
Greg Peel will return after Australia Day.
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