Daily Market Reports | Jan 21 2013
By Rudi Filapek-Vandyck, Editor FNArena
A late rally on Friday allowed the S&P500 to close at 1485.98, a gain of 5 points, or 0.34%. The Dow Industrials did a little better, with a gain of 53.68 (0.39%) to 13649.70 and Nasdaq ended with a tiny loss of 1.3pts at 3134.71.
Always expect the unexpected.
Last week I suggested the key event for the week would be the interview of disgraced cyclist Lance Armstrong by the queen of American pop-TV, Oprah Winfrey, with people asking each other in years to come: what were you doing when Lance confessed on Oprah? Turns out the sporting event of the week took place a good 48 hours later in the wee hours of Round Four of the Australian Open.
The question has now changed: did you see the epic contest between David (Stan The Man) and Goliath (The Djoker) in Rod Laver Arena? Stanislas will be ruing all those missed chances this morning.
Back on Wall Street, equities opened in lacklustre fashion. Intel's quarterly report had disappointed and a subdued read on consumer confidence provided little incentive to buy more stocks, despite better than consensus Chinese data. Indices opened lower and the Nasdaq traded some 15 points in the red when buyers started moving in around midday. Yet it wasn't until the final hour before investors really started pushing share prices higher.
The reason? Indications that both sides of politics are planning to attack the US debt ceiling problem three months later into the year. Kicking the can has become a popular sport in both Europe and the US and investors are loving it. Both S&P500 and DJIA are at new five year highs.
Media reports are referring to slightly higher Chinese data, but in my view those were already largely accounted for. Commodity markets on Friday traded mixed, with a slightly positive bias. This week will see the release of HSBC flash estimate of China's January manufacturing PMI, so there could be a follow-up to the positive China momentum story.
SPI futures in Sydney are indicating a buoyant opening for Australian equities this morning (+17).
Meanwhile, Barack Obama was sworn in this morning (Australian time) to a second term as US President during a private ceremony in the Blue Room at the White House. Vice President Joe Biden took his second-term oath earlier today in a similar ceremony.
As far as the calendar goes this week, Japan is currently at the centre of global investor attention, with the Bank of Japan expected to announce aggressive stimulus policy at the end of its two-day meeting on Tuesday.
Here's what analysts at Danske Bank had to say about it:
"First, we expect the inflation target to be raised from 1% to 2%. This would represent a major U-turn, particularly BoJ governor Masaaki Shirakawa, who had previously been fiercely against lifting the inflation target. However, compromising on this issue now would be the best way for Shirakawa to maximise his influence before his term as governor expires in April. If he and the BoJ board resist raising the inflation target next week, it will just be raised at a later stage by either a new more dovish majority on the BoJ board or a forced inflation target in a revised BoJ law."
Overall, the calendar for the week ahead is pretty light, apart from PMI releases across the globe. Europe has meetings of the Eurogroup and Ecofin, plus Cyprus remains in need of a rescue package, but observers expect negotiations to continue until March. US markets are closed today, so no corporate results either. Tuesday provides investors with a reading on business confidence in the eurozone and in the US the Chicago Fed national activity index and the Richmond Fed manufacturing survey.
The following day brings us consumer confidence in the eurozone, with global PMI releases on Thursday and the German IFO business climate survey results on Friday. Also, the International Monetary Fund (IMF) will release its projections for global economic growth, but we already had the World Bank paring back global GDP estimates. Few would have been genuinely surprised.
In Australia, investors can look forward to Q4 CPI and Westpac's Leading Index, both scheduled for Wednesday, plus various December quarter production reports. Companies including BHP Billiton ((BHP)), Fortescue ((FMG)) and Newcrest Mining ((NCM)) are all scheduled to report this week.
The US reporting season offers, on Tuesday, DuPont, Freeport-McMoran, Google, IBM and Johnson&Johnson, on Wednesday Apple's, and on Thursday 3M, AT&T and E*Trade.
I have been receiving questions from readers after I mentioned the Bundesbank's decision last week to repatriate most of its gold bars from foreign vaults. Officially, this is all about no longer needing to store most of Germany's gold on foreign soil, but US trader Dennis Gartman rightfully predicts the Germans have just started a new trend and one that will ultimately see the US dollar lose its reserve currency status. These big historic changes always start with a multiple of small steps. This is one of them.
Apparently, De Nederlandsche Bank has already indicated it will follow the German example.
Media reports on the German repatriation have shed some light on Australia's own gold history. Turns out, only a small part of the RBA's gold is actually kept inside vaults in Sydney; the majority is stored with the Bank of England. The same BoE that sold most of its gold bars at the bottom of the gold price in the late nineties. Turns out, the Howard government at that time was on board with the BoE, selling three-quarters of all Australian gold for around US$350/oz. Not quite as bad as the Brits, but definitely showing no foresight or any market timing skills!
The BoE has allowed one journalist and a camera inside its vault, which is a unique event. You can watch the report via the following link: http://www.periodicvideos.com/videos/feature_gold_bullion.htm
Sending a Special Thanks to Stanislas Wawrinka. Modern gladiators are armed with a tennis racket. You must be gutted today.
I will make my first TV-appearance of the New Year today at around 11.15am to discuss stockbroker upgrades and downgrades with Brooke and Carson on Sky Business. On Thursday I should appear on Lunch Money (noon-12.45pm).
For further global economic release dates and local company events please refer to the FNArena Calendar.
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