Daily Market Reports | Mar 18 2014
By Greg Peel
The Dow rose 181 points or 1.1% while the S&P gained 1.0% to 1858 and the Nasdaq added 1.0%.
Bridge Street watched and waited yesterday, posting a quiet session with all eyes on Crimea. The result of the vote was never in doubt, but no one knew what might happen next. This morning there is still no answer to that question, other than nothing so far. European Union ministers enacted bans on 21 Russian officials and froze assets but this seemed limp compared to what German chancellor Angela Merkel had been threatening last week. There were stern words from President Obama, but that’s all. And Putin is MIA.
Without attempting to stray too far into international diplomacy, which is not the mandate of this Report, one presumes Crimea must be allowed to cede from the Ukraine and join Russia as long as this is achieved peacefully. The concern is as to whether Putin will then be happy, or whether Crimea is simply step one in a full annexture of the Ukraine. It seems that Vlad is pining for the old days of the Soviet Union, clearly missing the KGB, the Cold War, the salt mines and the bread queues. But the Russian stock market is down 20% from its highs, the ruble has tanked, and Russians have been shifting their money out of country and into safety. What sort of Russia does Vladimir really want?
International stock markets were sold off last week more on the basis of shifting to safe havens because no one knew what was about to happen, rather than because the risk was clear. Whatever might have happened hasn’t, so last night the bargain hunters rushed back in on Wall Street. They didn’t achieve much – the Dow was up a couple of hundred points right from the open and then stayed there, roughly, all day. Take it out before the weekend and put it back on the Monday.
The reverse of putting your money back into the stock market is taking it out of safe haven trades, hence last night gold fell US$16.20 to US$1366.50/oz and the US ten-year yield jumped 5 basis points to 2.70%. The US dollar index was steady at 79.37 given the easing of European risk was more reflected in the euro, while the Aussie didn’t miss out either, rising 0.7% to US$0.9090.
Whether or not it made any difference on the day, US economic data releases were also positive last night. Industrial production grew 0.6% in February, beating forecasts of 0.2% and marking the fastest pace in six months. The surprise was attributed to the weather, or in this case, the easing of. But the February measure of the Empire State manufacturing index had registered an 8 point fall to 4.5, which was blamed on the weather. Last night’s March reading showed a bounce to 5.6. Similarly, while the NAHB housing market sentiment index has ticked up one point to 47 this month, a number below 50 means pessimism and that pessimism is supposedly being exacerbated by the weather issue.
The US weather impact is about as well understood at this point as Putin’s plans for the Ukraine.
Commodity markets remain unsure. Nickel added another 1% last night but copper held steady, while aluminium and zinc both fell 1%. West Texas crude saw a US89c fall to US$98.00/bbl on a supposed easing of supply risk but more closely affected Brent was steady at US$108.54/bbl.
Iron ore marches to its own tune and was down US50c to US$109.60/t.
The SPI Overnight rose 23 points or 0.4%.
Crimea hit the spotlight a couple of weeks ago and caused international markets to sell off. Putin said his intentions were not sinister so markets rebounded again. Then a referendum was announced and markets sold off once more (notwithstanding a little help from China concerns) and now that’s over markets have bounced back a second time. Will we try for three?
The minutes of the March RBA meeting are due out today and the market will look for clues as to whether there is still any scope in the central bank’s policy for more easing. Economists remain split on whether the next move will be down or up, but Westpac has just removed its call for two more cuts. Chinese property price data are also due today.
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