Daily Market Reports | Dec 03 2012
By Greg Peel
If we recall “the worm” from the days of Australian election debates and apply it in principle to the ups and downs of Cliff rhetoric in the US, we could say that Friday was a down-day for the worm. Boehner suggested debate had so far “gone nowhere” and Obama admitted “prolonged negotiations” were ahead. However, there was little direct response from Wall Street this time.
It may have been because one of the large MSCI international stock indices was rebalancing (promoting and relegating stock constituents and adjusting weightings) at the close of the session and no one wanted to get caught out, or it might be that Wall Street is beginning to realise the worm will continue to rise and fall over the course of December and there's little point in trading backwards and forwards frantically on its undulations. Either way, after a low volatility session the Dow closed up three points to hang in there above 13,000, the S&P was flat at 1416 and the Nasdaq lost a point.
Interestingly, equity funds tracker EPFR Global noted the week's inflows to major funds netted at over US$10bn, which is the highest positive figure in over a year. Why now, of all times? Is it because there is a general underlying faith in Cliff being resolved one way or the other, or is it because with cash and fixed interest rates so low, with no sign of any change in the near future, it's come to the point where equities are the only realistic investment option left?
After the recent positive trend for US consumer spending, to the point spending growth has exceeded income growth, the October figures for personal incomes and spending released on Friday both showed a decline. However, the aberration was put down to Sandy, and for the next few months the apparent trend will be distorted by similar Sandy-impacted numbers.
Japan released a raft of monthly economic data on Friday, and the numbers were much better than the month before, which were awful. Japan is still suffering from Chinese boycotting, but the government has approved another stimulus package and the rhetoric there continues to be of a bottomless pit of money printing. Hence the small rise in the US dollar index on Friday to 80.23 was all about the yen. The euro was stronger, aided by the German parliament's approval of the Greek bail-out payment. One parliament down, sixteen to go.
When the Cliff worm turns down, gold tends to be sold. This is largely a tax consideration given gold is one asset in which investors have made profits for the year, and if the 2013 tax is going to be higher than the 2012 tax, then best to take profits now. It was down US$11.00 on Friday to US$1715.10/oz despite the steady greenback. The Aussie is little changed at US$1.0429.
It was a surprisingly strong session for commodities, however, which traders put down to confidence ahead of Saturday's release of the official Chinese manufacturing PMI. All base metals were up 1% except nickel which was up 3%, while Brent crude rose US39c to US$111.15/bbl and West Texas rose US87c to US$88.94/bbl. Spot iron ore nevertheless fell US$1.30 to US$115.60/t.
The SPI Overnight was up 12 points, or 0.3%.
The Chinese PMI came in at 50.6 for November, up from 50.2 in October. Nothing too flash and a little shy of a consensus estimate of 50.8, but positive nevertheless and the best result for seven months. The number is consistent with expectations that the Chinese economy has stopped slowing and has stabilised, with the outlook now for modest growth.
HSBC will release its manufacturing PMI for China today while Beijing will release the official service sector PMI. Australia, the eurozone, UK and US will all release manufacturing PMIs today and service sector PMIs on Wednesday. Australia will release its construction PMI on Friday.
Indeed, it is a very busy week this week on the Australian economic front. The last of the September quarter data ahead of Wednesday's GDP result will be released including company profits and inventories today and net exports and the current account tomorrow. The RBA has to make a rate decision tomorrow before the GDP release, and the jury is still out on whether the central bank may feel it prudent to cut the cash rate again now given a two-month gap to the next meeting. Chinese data may be a swing factor. Were the RBA to cut, the resultant 3.00% will match the “emergency” rate post GFC.
Consensus has Australian GDP growth at 0.6%, matching the June quarter, for 3.1% annualised growth, down from 3.7%.
There is a raft of local monthly data out this week as well, on top of the three PMIs. Today sees retail sales, ANZ job ads, the TD Securities inflation gauge and the Rismark RP-Data house price index, tomorrow brings building approvals, Thursday the unemployment numbers and Friday the trade balance.
It's also jobs week in the US, with the ADP private sector number out on Wednesday and non-farm payrolls on Friday. Tonight sees construction spending, tomorrow vehicle sales, Wednesday factory orders and Friday fortnightly consumer sentiment, on top of the PMIs.
On Thursday night the ECB will hold a monetary policy meeting and given there has been no fresh word from Madrid, nor any sign whatsoever of there being so, Mario Draghi will once again be acting in a vacuum implying no change. The Bank of England will also meet.
The vast bulk of local AGMs are now behind us, but there are a handful to be held this month, including Ten Network ((TEN)) on Thursday and Myer ((MYR)) on Friday.
And the worm will continue to turn.
Rudi will appear on Sky Business today at 11.15am and on Thursday at noon.
For further global economic release dates and local company events please refer to the FNArena Calendar.
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