Daily Market Reports | Apr 17 2013
By Greg Peel
The Dow rose 157 points, or 1.1%, while the S&P gained 1.4% to 1574 and the Nasdaq added 1.5%.
“We hope and pray that Boston is a singular event, and that’s all there is going to be,” one fund manager told Dow Jones last night.
At the risk of being distasteful and disrespectful, the Boston terrorist attack, assuming that’s what it was, was no 9/11. It appears to have been a one-off and most likely not carried out by a major group such as Al Qaeda. It is therefore not an event that will impact on global financial markets.
We recall that Monday’s 265 point fall in the Dow by the closing bell was already a fall in excess of 200 points during the session based on the weak Chinese GDP and recently weak US economic data. There was a slide to the bell on the Boston news which at that stage was far from clear.
As Boston has not evolved into anything more destructive than that which we now know, there was no incentive for Wall Street to fall further last night on Boston alone. But nor was there any reason to rebound solidly on Boston alone, given Monday’s fall was unrelated. That required an impetus to buy, beyond just that of bargain hunting.
Data released last night showed US housing starts for March rose by 7%, exceeding economist expectations, to their highest level since June 2008. Year on year, starts are up 47%, the fastest growth since 1992. Industrial production rose 0.4% in March, beating expectations of 0.2%. While unseasonably cold weather boosted utility output, surging auto manufacture to meet surging demand also provided the “beat”.
CPI headline inflation fell 0.2% when a fall of 0.1% was expected. Lower energy costs were the major driver. The core CPI rose 0.1% when 0.2% was expected. While lower than expected inflation is a positive in terms of not forcing the Fed into an early QE exit, it also raises the spectre of a return to the deflation of the GFC recession.
In earnings season news, lost in the wash of all that was happening on Monday was Citigroup’s result, which was a strong beat. Last night Coca-Cola (Dow) posted a similar result, its shares rising 5.7%. Johnson & Johnson (Dow) reported stronger than expected revenues, and its shares rose 2.1%. Goldman Sachs posted an earnings beat, but disappointed the market on lower trading revenues.
After the bell, Intel (Dow) largely met expectations, albeit those expectations had been adjusted to account for weakening PC sales, while Yahoo failed to impress and its shares are down 4% in the after-market.
On Monday, funds flowed into the safe haven US dollar and also back into the yen as yen carry trades were hastily unwound. Last night saw a reversal, with both currencies falling and the euro bouncing back to send the US dollar index down 0.7% to 81.81. After heavy selling on Monday, the Aussie has bounced almost a cent to US$1.0392.
The asset in the spotlight is nevertheless gold, and there are plenty of theories swirling around as to what really caused the big gold sell-off. There is no clarity. Aside from a lack of inflation, a nervous herd and a Goldmans downgrade, theories range from a global central bank withdrawal of coordinated stimulus to more sinister accusations of the bullion banks being short of physical metal and orchestrating a sell-off in order to restock inventories at a lower price. We will likely never know.
What we do know is that gold staged a modest, under the circumstances, rebound last night in rising US$21.20 to US$1366.90/oz. Gold investors have been emotionally shaken, and while the stalwarts point to ongoing paper money printing, including from the Fed, as every reason to hold gold, experienced traders warn that the loss of confidence could mean further falls to come. Silver rebounded 2.5%. Not helping the mood was the announcement from the CME last night that, given increased volatility, margin requirements on precious metal futures contracts will be raised.
Base metals also staged a tentative rebound last night, with traders looking to pick up cheaper priced metal, but standing ready to head for the exits again on the slightest impulse. Aluminium, lead and zinc led the charge with 2% gains, while copper managed only 0.5% and tin and nickel remained steady. Spot iron ore fell US$1.50 to US$139.40/t.
The oils took a breather, but remain vulnerable to the downside. Brent fell US72c to US$99.91/bbl on the new June front month, while West Texas closed a few cents higher at US$88.78/bbl.
The SPI Overnight rose 33 points, or 0.7%.
BHP Billiton ((BHP)) will provide its March quarter production report today.
All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available in the FNArena Cockpit. Click here. (Subscribers can access prices in the Cockpit.)
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.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.
