Daily Market Reports | May 10 2013
By Greg Peel
The Dow closed down 22 points, or 0.2%, while the S&P fell 0.4% to 1626 and the Nasdaq lost 0.1%.
Some say it was rumour the Fed was thinking about how to pare back QE, but that story gained little traction and is completely at odds with the Fed’s last policy statement. Others say it was something to do with a derivative play in Japanese government bonds, which caused the yen to finally crash through the 100 yen to the dollar mark after having failed so many times. Others say it was simply technical, and no doubt stops were triggered to help the dollar-yen to the 100.68 mark on last count.
Whatever the cause, the US dollar index is up 0.9% in 24 hours to 82.66 as not just the yen, but the euro, pound and Aussie all took a subsequent dive. The good news is the Aussie is down 0.8% to US$1.0088 and it has nothing to do with China.
I spoke earlier in the week of the chocolate wheel that is the US jobs data. A snap survey is taken to deliver the first result and then a more substantial survey is taken to provide later revisions. Well it looks like Australia now has its own chocolate wheel. Yesterday’s announced addition of 50,000 jobs had economists scoffing to begin with, before discreetly suggesting the ABS is having a little trouble with its new seasonal adjustment formula.
Let’s put things into context. Last Friday the US, population 300m plus, learned that 168,000 jobs were created in April, and they partied in the streets. Yesterday Australia, population 23m, learned that 50,000 jobs were created, despite relentless newsflow of job losses across the country. Seem incongruous?
February’s Australian jobs number seemed way too high, then March’s number corrected that anomaly. April’s number seems way too high, so “sell in May”. Suddenly the ABS numbers are so volatile that economists are recommending they be ignored, with the ANZ job ads series offering a much smoother employment indicator. And that series is clearly on a downward path, or upward in unemployment terms.
The Aussie nevertheless spiked on the jobs release yesterday, to completely cancel out the rate cut-related drop from Tuesday. Thank God whatever it was that happened in the greenback last night happened, and let’s hope it does not, too, prove an anomaly.
Yesterday’s Chinese inflation data for April were somewhat concerning. The issue is not with a CPI increase of 2.4%, which was only a tick above 2.3% expectation, but with a 2.6% drop in the producer price index. In March the Chinese PPI fell 1.9%. China is suffering from wholesale price deflation, and that is not a sign of a healthy economy. Chinese stock prices fell as a result, and the ASX 200 took a breather after a week of solid switching into cyclicals.
Wall Street had been stumbling along doing not much for most of the session, with an announced first profit from electric sports car pioneer Tesla, sending its shares up 32%, providing the day’s curiosity. The weekly new jobless claims number again showed a drop, with the running monthly average now back to November 2007 levels. But just after 2pm the dollar suddenly took off, and stocks subsequently fell into a hole. The indices then bounced around in confusion to the close.
The dollar move also had an impact on the bond market, with the US ten-year yield jumping 5bps to 1.81%. Gold felt the full force, dropping US$16.30 to US$1456.90/oz.
The LME would have just caught the beginning of the dollar jump before closing, hence base metal prices are all off a little. The spot iron ore price is unchanged at US$130.20/t. The oils had a mixed session, with Brent a bit higher at US$104.47/bbl and West Texas a bit lower at US$95.99/bbl.
The SPI Overnight rose one point.
The SPI move hints at today being very much a Friday, with no local earnings reports to contemplate and only the RBA’s June quarter Statement on Monetary Policy to ponder on the economic front. There’s unlikely to be anything in that report to usurp Tuesday’s monthly policy statement. Chinese lending data are due today.
G7 finance ministers and central bankers begin a two-day meeting tonight, but no one expects anything sensible.
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