Daily Market Reports | Apr 01 2011
By Greg Peel
The Dow closed down 30 points or 0.3% while the S&P lost 0.2% to 1325 and the Nasdaq ticked up 0.2%.
It ended not with a bang but with a whimper. The window displays all now look very pretty and there's tonight's jobs report to worry about, so on light volume Wall Street took a breather last night. The broad market S&P 500 index closed up 5.6% for the March quarter which marks the best March quarter since 1998. The Dow was up 6.6% – best since 1999. All this and QE2.
There was a mixed bag of data out in Australia last night. February retail sales looked good at a 0.5% gain but take out Queensland's need to replace furniture, whitegoods etc and we arrive at only a 0.1% gain, consistent with the current weak retail environment. The housing market remains subdued with building approvals again down sharply and house prices flat, while business credit showed encouraging signs within the 0.5% gain in overall private sector credit. Westpac economists suggest business credit is ready now to pick up and put in a strong growth performance in 2012.
At the quarter's close of 4837 the ASX 200 was up only 2% for the March quarter by comparison. The S&P 500 is 1.3% from its February high and the ASX 200 is 2% away. Note that the largest sector in the S&P is energy (13%) with materials only 3% whereas materials dominate the ASX 200 . Oil has been the bigger mover in the March quarter.
Brent crude was up a whopping 24% for the quarter, running away from West Texas crude which is oversupplied at its delivery point. Last night oil broke out of its recent range on the news the rebels were being forced into retreat in Libya, with Brent rising US$1.97 to US$117.10/bbl and WTI up US$2.32 to US$106.39/bbl.
Oil, and subsequent inflation, will be the stories for the June quarter.
On the matter of inflation, we have now reached a rather interesting, “who'd have thunk it” point. Wall Street is looking for a jobs number over 200,000 tonight to reduce unemployment, but for the first time since the GFC Wall Street doesn't want a number that's too much bigger because then inflation becomes a factor.
Right on the death last night, another FOMC member stepped into the inflation debate. Narayana Kocherlakota from Minneapolis suggested the Fed could raise its funds rate by 0.75% by the end of the year. That now makes four declared hawks out of a voting committee of eleven – not yet a majority, but certainly enough to scupper any further talk of QE3. Kochie, as he's probably known to his mates, noted expectations that the US economy should mark 3.0% growth in 2011. There is a growing confidence the withdrawal of QE2 will not derail the stock market. Remember we will shortly be into the first quarter reporting season ahead of the QE expiry.
Yet in February US factory orders marked their first decline in four months, falling 0.1% when economists had expected a gain of 0.4%.
An estimate of March CPI for the eurozone came out last night at a 2.6% increase, higher than expected. The euro thus outpaced the US dollar but the inflation race, and subsequent monetary policy scramble, is on in earnest. The ECB will raise in April, the UK may also, but the US dollar index will now be reflecting expectations of rate rises locally as well. Don't forget that to remove QE2 is too effectively raise rates even if the funds rate stays at zero for the time being. The dollar index was slightly lower at 76.10 last night, and the invincible Aussie was up again slightly at US$1.0349.
More wobbles in MENA had gold up US$10.80 to US$1433.30/oz but the big story of the March quarter has been the silver price, which was making fresh multi-decade highs last night again, up 0.8% to US$37.66oz. Silver is up 22% for the quarter and 12% for the month.
Base metals wrapped the quarter with a slight recovery from Wednesday night's falls, while the US ten-year bond yield added three basis points to close the quarter at 3.47%. Watch out for bonds in the June quarter.
The SPI Overnight was up 2 points.
Today is manufacturing PMI day across the globe, beginning with Australia and then flowing on to China, the UK, eurozone and US. And tonight it's jobs in the US, of course.
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