Daily Market Reports | Jul 01 2013
By Greg Peel
Friday on Bridge Street saw a relatively flat close as any attempts to window dress for the end of the quarter and financial year were well met by tax selling in the other direction. Friday night on Wall Street saw a similar session for end of quarter, with indices opening lower, rebounding to float along the flatline and finally succumbing to selling on the death. The Dow closed down 114 points, or 0.8% while the S&P lost 0.4% to 1606 with the Nasdaq closing flat. Wall Street finished lower for the month but up for the quarter.
Last month economists were unsure as to why the Chicago PMI reading rebounded to such a strong pace of expansion at 58.7 and had expected a pullback to 55.0 for June. The actual result of 51.6 was thus a disappointment, but probably more realistic. The final Michigan Uni consumer sentiment reading for May of 84.5 was also a surprise at the time and a slip to 82.7 followed in the first fortnight of June, but June’s final reading rebounded to 84.1 to exceed economist expectations.
The two results are typical of a US economy that is looking better but not wildly so, allowing Wall Street to assume that while September could bring the first tapering move from the Fed, such a move is more likely later down the track. On Friday the Fedheads were at it again, espousing their own various theories.
Board of Fed Governors member Jeremy Stein remarked in a speech that Fed tapering could begin as early as September, but was quick to point out this was only a hypothetical scenario. If data releases are not encouraging in the lead up to the September meeting, or thereafter, the remainder of the bond purchase program could be extended accordingly, said Stein.
The San Francisco Fed president suggested on Friday it was “better to wait a bit”, while the Richmond Fed president helpfully noted there is likely to be more volatility over the outlook for monetary policy in the coming months.
Meanwhile on the US earnings front, a disappointing quarterly delivered by IBM after the bell on Thursday saw its shares down 2.3% on Friday, while hopes a resurrection for the new-look BlackBerry were shot down before the open when the company reported a weaker than expected result that saw its shares plunge 28%.
The greenback continued its push higher on Friday, rising 0.3% to 83.18 on its index. The rise did not prevent a sharp short-covering rally from gold to cap off what was otherwise another horrible week for gold bugs, with the metal jumping US$34.30 to US$1235.30/oz. The US ten-year bond yield closed the quarter steady on 2.48%.
The Aussie took a sudden dive on Friday, belying expectations of a bit of a rebound in the near term after some heavy falls in June. The Battler is down 1.5% from Friday morning at US$0.9146. One explanation being offered is a move by the IMF to separate the listing of both Australian and Canadian dollars into their own lines in the regular foreign reserves report, with both formerly swallowed up in the “other currencies” line. Apparently the US$98.66bn of Aussie deemed by the IMF to be held by foreign central banks is less than economists had assumed, hence the devaluation.
Base metals wrapped up the quarter with a whimper in London, with price moves mixed but all minimal. The oils eased off again, with Brent down US50c to US$102.16/bbl and West Texas down US56c to US$96.49/bbl.
The SPI Overnight closed down 7 points, or 0.15%.
As the first week of the month it’s a busy week for economic data releases across the globe, not the least important being US jobs numbers upon which Fed tapering hinges. But it is also an abbreviated week on Wall Street, with markets closed on Thursday for the Independence Day holiday.
Today sees manufacturing PMI releases from Australia, China (official and HSBC), the eurozone, UK and US. Wednesday sees the same round of service sector PMIs.
Tonight in the US brings construction spending, Tuesday sees factory orders and vehicle sales, and Wednesday the trade balance and private sector jobs number for June. On Wednesday the NYSE will close early at 1.00pm local ahead of the Thursday break. On Friday it’s the all-important non-farm payrolls.
The eurozone will see inflation and unemployment data tonight and retail sales on Wednesday. On Thursday the Bank of England will hold its first policy meeting under the new governor Mark Carney, of whom great things are expected. It is nevertheless not expected Carney will be bold enough to push for increased QE on debut.
It’s a busy week for Australia, beginning with ANZ job ads, the TD Securities inflation gauge and RP Data-Rismark house price index out today, along with the manufacturing PMI. On Tuesday the RBA will make a rate decision, but given the fall in the Aussie is not expected to budge at this stage. Economists are still eyeing August.
Wednesday brings the trade balance, retail sales and new home sales along with the services PMI and on Thursday its building approvals. Friday wraps up with the construction PMI.
How will Bridge Street open its hand for the new financial year? Last week closed with hints of a little bit of buying. We could be in for a volatile week on Wall Street, not just because just about every week has been volatile lately or because more Fedheads are likely to open their mouths to either diffuse or confuse the issue, but because of the holiday. As one might imagine, a few tumbleweeds may roll through the NYSE on Friday given a half-day Wednesday and the prospect of a four-day long weekend. The jobs numbers might be released to three men and a dog.
Rudi will appear on Sky Business today at 11.15am and on Thursday at 7.45pm for the Switzer Report.
For further global economic release dates and local company events please refer to the FNArena Calendar.
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