Daily Market Reports | Feb 17 2014
By Greg Peel
There was not much holding back Bridge Street on Friday as the ASX 200 ploughed onward to rise another 0.9% for a close of 5356 – less than 100 points below the November post-GFC high of 5441. At a time when earnings season should suggest a little caution and some disparate moves among stocks and sectors, every sector was in the green.
China’s steady CPI reading of 2.5% (year on year) in January helped buoy markets, suggesting inflation is providing no need for Beijing to tighten monetary policy at a time China’s economy is apparently slowing. But China’s PPI inflation was down yet again, by 1.6%, as demand continues to moderate. The early lunar new year will distort the numbers, nevertheless.
The mood on Bridge Street is being assisted by the mood on Wall Street, and the mood on Wall Street remains exuberant. On Friday traders once again exercised the “weather put” to ignore the weak data while taking on board positive data and rallying once more. The Dow rose 126 points or 0.8% while the S&P gained 0.5% to 1838. The Nasdaq managed 0.1% and is back at a post-2000 all-time high.
US industrial production data for January released on Friday night showed a 0.3% fall when a 0.3% rise was expected, and capacity utilisation fell to 78.5% when 79.3% was expected. But hey – it was snowy outside in January, which one might expect to have an impact on production capacity. The snow does not have an impact on the mind though, and Wall Street was pleased to see Michigan Uni’s fortnightly consumer sentiment measure remain unchanged at 81.2 when economists were expecting a fall to 80.0.
It was a good enough excuse to buy.
Also providing confidence was the December quarter GDP performance by the eurozone. It rose 0.3% to mark its best quarter for the year and an annualised growth rate of 1.1%. Germany again did the heavy lifting but positive results were all marked by Spain, Italy and even France, the latter having posted negative quarters during the year. The European growth rate is still lagging behind those of the US, UK and Japan (and Australia, we hope) but given the basket case that Europe was not so long ago, the news can only be reassuring.
Reassuring enough that despite the rally back towards all-time highs on US stock markets, the US dollar continues to sag. It fell 0.2% to 80.13 on Friday night. Despite the strength one assumes should be provided by the Fed’s tapering policy, the dollar index is weak because (a) exchange rates are relative, not absolute, and (b) weather or not, US January economic data have been weak. It is this weakness that appears to be driving the surprise rally in gold, along with short-covering by all those who joined the “gold is done for” chorus at the beginning of the year. The break of 1300 on Thursday night sparked more buying on Friday night, with gold rising US$17.20 to US$1318.10/oz.
The combination of a weaker greenback on local data and Friday’s positive China data means the Aussie is unfortunately back at US$0.9053, up 0.7 cents from Friday morning.
Base metals did little on Friday night bar tin, which rose 2%. Brent crude rose US52c to US$109.04/bbl while West Texas was largely steady at US$100.30/bbl. US energy markets are currently more obsessed with the price of natural gas and the potential extent of the icy winter. Punxsutawney Phil saw one hell of a shadow.
Spot iron ore rose again, by US$1.20 to US$123.20/t. Perhaps we’re seeing the US steel industry quietly ramping up again after the holiday break.
More today on Bridge Street? The SPI Overnight rose 44 points or 0.8%.
Japan’s December quarter GDP is out today and the Bank of Japan holds a policy meeting tomorrow.
The US is having a long weekend for Washington’s birthday, although no one be will be much going anywhere, so no Wall Street tonight. A busy week of US data nevertheless follows, with housing sentiment and the Empire State manufacturing index on Tuesday, housing starts, the PPI and the minutes of the Fed meeting on Wednesday, the CPI, Philadelphia Fed manufacturing index and flash manufacturing PMI for February on Thursday, and existing home sales on Friday.
China’s flash manufacturing PMI from HSBC is also out on Thursday along with the eurozone equivalent.
Economic data are light on in Australia this week, with vehicle sales today (bitter sweet), the minutes of the RBA meeting tomorrow and the December quarter wage cost index on Wednesday, which tips us off that Australia’s GDP result is nigh (March 5).
Meanwhile the local earnings season will now shift into top gear for the next two weeks. There are too many results pending to provide highlights, so please refer to the FNArena calendar.
The G20 finance ministers begin a three-day meeting in Sydney on Friday. After months of dry, Sydney has turned on the rain just so George Osborne feels at home.
Rudi will only appear on Sky Business today at 11.15am. He will give a presentation on Thursday in Sydney for members of the Australian Shareholders Association (ASA).
For further global economic release dates and local company events please refer to the FNArena Calendar.
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