The Overnight Report: Well The Weather Outside Is Frightful

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By Greg Peel

The Dow closed up 63 points or 0.4% while the S&P gained 0.6% to 1829 and the Nasdaq added 0.9%.

As to why yesterday’s local unemployment data were such a “shock” to everyone is a mystery. For most of last year economists and analysts called the unemployment rate higher, only to be surprised by its stubborn refusal to move much. Meanwhile the country endured highly publicised retrenchments across the manufacturing sector and slowly the FIFOs thinned in number as mining construction slowed.

It is nevertheless disturbing that the last time we saw a 6% unemployment rate was in 2003, albeit economists have been tipping a 6.5% rate ahead for some time. Participation was steady, so the hike did not reflect the jobless suddenly returning to job-seeking given improving conditions. The good news in the numbers is that average man-hours worked continued to tick up. Rising man-hours must eventually give way to fresh hiring.

And the silver lining is the Aussie, which has fallen half a cent to US$0.8986. One minute the forex markets think RBA easing is over and the next they’re not so sure. The weak jobs number could have been an excusable trigger for a sell-off on Bridge Street after a run of solid gains, but the index merely closed flat after a quiet night on Wall Street. There were a similar number of companies reporting earnings yesterday as there were on Wednesday, but unlike Wednesday there were no particular stars.

Over in the US, the weather has rolled in again. Big time. Meteorologists are forecasting snow in feet, not inches, as what looks like being the worst storm yet rolls up the east coast. The snow was deep enough to shut down Congress for the day in Washington, hence Janet Yellen’s second testimony – to the Senate Banking Committee – was postponed. Transport has come to a standstill and power outages are widespread. Schools are closed and many businesses likewise.

Which means we’re going to be in for another round of weather-impacted data in the February numbers. On that note, last night’s US January retail sales numbers disappointed with a 0.4% fall against 0.1% expectation. The previous numbers for both December and November were also revised down. Weather or weakness? Well, weather may certainly have been a factor, but it can’t be the only factor. On-line sales fell 0.6% in January – the largest decline since May.

Actual weakness was apparent to traders, who proceeded to sell such that the Dow was down 100 points from the open. But shucks, why don’t we just buy it anyway? The open was the low point of the session. A steady rally then followed, returning the Dow above 16,000 again for the first time since the third week of January.

Perhaps we now have two “free puts” in place on Wall Street: the ever present put formerly known as the Bernanke Put (we will do whatever it takes!) and now a Weather Put, that is, if the data are bad then it’s probably just the weather.

The forex markets didn’t really see it that way, given the US dollar index fell 0.5% to 80.29. The fall included a 0.6% gain in the euro, which came despite some news out of that pillar of political stability – Italy.

Italian prime minister Enrico Letta has tendered his resignation after ten months in office. He will make way for his critic and rival, the 37 year-old Matteo Renzi. Renzi heads the Democratic Party which is Italy’s largest political group, so that makes sense. Except for the fact Letta is also a Democratic Party member. It has been pointed out in the press that Renzi is even younger than Mussolini was when he took office. Fortunately the Democratic Party is centre-left.

Perhaps Italy is a reason, and the fall in the greenback is no doubt a reason, but it also seems gold has become the hedge of choice against US economic uncertainty. It rose US$8.80 last night to retake the US$1300/oz level, just.

Base metals were mixed and apparently confused last night while oils have seemingly gone to sleep, barely moving in last night’s trade. Spot iron ore was up another US$1.00 to US$122.00/t.

I don’t know what the SPI Overnight traders are on but I’d like some. The SPIO rose 33 points or 0.7%.

China releases its January inflation data today while today’s local earnings result highlight will be Newcrest Mining ((NCM)). The eurozone will post its first estimate of December quarter GDP tonight and the US will release January industrial production numbers, which will probably be weather-affected.

Ladies please, no more mail.
 

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