The Overnight Report: Sailing On

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By Greg Peel

The Dow rose 86 points or 0.5% while the S&P gained 0.5% to 1878 and the Nasdaq added 0.8%.

Up by the stairs and down by the elevator. That was the story for the local market yesterday after plunging 0.9% following seven holiday-thin sessions of steady graft northward. The air was getting a bit thin above 5500, without any definitive impetus. The iron ore price has taken a dive since last week, and yesterday brokers began to target perceived overvaluation for the banks ahead of upcoming earnings results. Throw in a so-so result for Wesfarmers’ stable of retail flagships and profit-taking seemed like a good idea.

And as happens so often in the local market these days, selling begat selling and the snowball effect affected a sharp one-day plunge. Nothing particularly sinister – we’re simply back where we were last Tuesday, ahead of this week’s US GDP and jobs data and a Fed meeting, Chinese manufacturing numbers, European inflation estimates and a Bank of Japan policy meeting.

I made note yesterday of unconfirmed reports Russian troops had left the Ukrainian border and returned to base. Well apparently it is true. Moscow has also provided Washington with an assurance it will not invade Ukraine. Not that Wall Street seemed hugely perturbed about the situation in the FSU, but the news was enough to encourage some “risk-on” buying of cyclical stocks last night, once again sending the Dow up to flirt with all-time highs.

Unlike Monday’s rollercoaster ride, last night’s session saw a straightforward early rise, then sideways most of the day before fading a little at the close. The result was the same Dow gain nonetheless as was marked on Monday. It is testament to renewed interest in solid blue chips that while the Dow fell just short of an intraday all-time high last night, the S&P 500 is still more than 20 points away. Therein lies the Nasdaq effect.

Last night saw Merck (Dow) rise 3.6% after posting a solid result. But just to drive home the flighty internet story, after the bell eBay disappointed and its shares are down 4% in the after-market and new kid on the listed social media block – Twitter – is currently suffering a 10% fall.

The data releases for the night were nothing to write home about either. The Case-Shiller 20-city house price index rose a seasonally adjusted 0.8% in snowbound February, but year-on-year growth trend is easing. Prices were up 12.9% over twelve months to February having been up 13.2% in January and peaking at 13.7% last November. The Conference Board measure of consumer confidence showed a fall to 82.3 from 83.9 last month, which was then a six-year high. Economists had expected an increase, consistent with the more positive Michigan Uni fortnightly series.

Ahead of tonight’s flash estimate of eurozone inflation for April, which may or may not prompt the ECB into action, Germany’s own flash disappointed with a 1.1% CPI increase when 1.3% was expected. The euro subsequently fell against the US dollar, sending the US dollar index up 0.1% to 79.80. The pound was also a tad weaker, following a 0.8% growth rate reported for the UK March quarter GDP which fell slightly short of estimates, although year-on-year growth of 3.1% was in line. Rule Britannia.

Gold was steady last night at US$1295.90/oz and the Aussie is up a tad to US$0.9269.

Base metal price movements were mixed and underwhelming ahead of the data blitz beginning tonight while spot iron ore fell another US30c to US$108.30/t.

Nor did the oils move the needle much, with Brent up US58c to US$108.86/bbl and West Texas steady at US$100.83/bbl.

The SPI Overnight rose 19 points or 0.4%, suggesting some stability may return in today’s local session. Having spent a long time playing argie-bargie around 5400, we’re now doing it around 5500.

The fun and games should start from tonight when the eurozone CPI comes out, along with the US private sector jobs number, the US March quarter GDP result (1.5% expected) and a Fed meeting.

Locally, private sector credit data is out today along with interim earnings results from Australian Pharma ((API)) and BT Investment Management ((BTT)), production reports from Lynas ((LYC)), Origin Energy ((ORG)) and Paladin Energy ((PDN)), and sales numbers from Woolworths ((WOW)). Woodside Petroleum ((WPL)) will hold its AGM.

Rudi will appear on Sky Business at 5.30pm.
 

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