Daily Market Reports | May 23 2014
By Greg Peel
The Dow closed up 10 points while the S&P gained 0.2% to 1892 and the Nasdaq rose 0.6%. The Russell 2000 remains in the spotlight, last night rising 0.9%.
Well, one dollar up in the iron ore price and we’re up 55 points in the ASX 200. And, consequently, about square for the week. A positive lead from Wall Street helped to start things off, as did iron ore, and HSBC’s flash estimate of China’s May manufacturing PMI showed a solid jump to 49.7 from 48.1 in April when economists had expected a flat result. Then we were off to the races.
Last night iron ore was up another US30c to US$98.80/t, which should consolidate things today. Yesterday the materials sector shot up 1.7%, and energy rebounded 1.3% as investors anticipated a juicy special from Woodside now the company is out of Israel. There’s no way the budget will get through the Senate in its current form, so yesterday was the day to buy back the knocked-down healthcare sector (up 1.8%). It all came together despite Telstra having a quiet day.
Over on Wall Street, summer is in the air. Only five minutes ago we were trying to assess the true impact of snow and ice, and next week we’ll see the first revision of the US first quarter GDP which may actually show a negative. But it’s the Memorial Day holiday on Monday, and the long weekend unofficially signals the beginning of the holiday season. That’s why we “sell in May”.
But not this May. Wall Street was so quiet last night it seemed as if it were a half-day session. Tonight, presumably, only two men and a dog will turn up. The major indices consolidated their gains from Wednesday night but yet again the Russell 2000 took the headlines, jumping 0.9% on a biotech-led surge. Russ could just as easily collapse again tonight, such is the way that index has been trading of late.
The US flash manufacturing PMI, released last night, jumped to 56.2 from 55.4. Sales of existing homes rose in April for the first time in 2014, up 1.4%. The Conference Board leading economic index rose 0.4% in April. Looks like the US economy is fine.
Except that the Chicago Fed national activity index has fallen to minus 0.32 this month from plus 0.34 in April, and after a big drop the week before, last week’s jobless claims showed a solid rebound. So maybe not quite so fine.
And that is the problem in a nutshell. No one knows, least of all the Fed, just what state the US economy is really in. And the Fed has no idea, it has all but admitted, just how it is going to go about getting out of QE. (Which is not “tapering”. Tapering simply means slowing down the buying of bonds. Getting out of those bonds is another story altogether.)
The eurozone’s flash PMI showed an easing to 53.9 from 54.0 in April. This will not prevent Draghi from acting next month although it’s still a healthy number, and enough to make an Aussie manufacturer weep. The first revision of UK’s March quarter GDP showed an unchanged 0.8% gain for a 3.1% annualised growth rate. Jolly good show.
Good Lord, the US dollar index rose 0.2% last night to 80.22. Must have given itself a real shock. Gold remains in hibernation nevertheless, steady at US$1293.70/oz. The US ten-year has ticked up again, last night up 2bps to 2.56%.
The Aussie shot up on the Chinese PMI release, and then drifted lower all through yesterday afternoon and last night to actually be down 0.3% over 24 hours to US$0.9229. It’s a good day when stocks go up and the Aussie goes down.
They loved the Chinese flash on the LME, and sent all metals higher, including a 1.3% gain for aluminium and 1.4% for now volatile nickel. As noted, the spot iron ore price rose US30c to US$98.89/t.
The oils were steady last night. Brent closed at US$110.36/bbl and West Texas at US$103.78/bbl.
The SPI Overnight rose 11 points or 0.2%. The June contract, which expires in a month, is sitting at 5499.
The ASX 200 needs only 21 points and we’re back at 5500. For a minute there 5300 was looking possible. Such is the market.
Avagoodweegend.
All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available in the FNArena Cockpit. Click here. (Subscribers can access prices in the Cockpit.)
(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)
All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.
