Daily Market Reports | Oct 01 2014
By Greg Peel
The Dow closed down 28 points or 0.2% while the S&P lost 0.3% to 1972 and the Nasdaq dropped 0.3%.
The Australian market finally managed a rebound yesterday, with banks, the telco and healthcare in particular being snapped up after days of falls. But as to whether we can read much into this anomaly is a case in point given yesterday was the last day of the September quarter and thus no doubt was impacted by position squaring and window dressing. It was not a day for any trend to be identified.
There is a clear clue in the fact Wall Street lost only 0.3% last night but the SPI Overnight is signalling a rather more substantial 0.6% point drop. The final score card for the quarter was a 6% loss for the ASX200, and a 1% loss year to date.
The protest in Hong Kong is ongoing, without fresh incident, as we move into China’s week-long National Day holiday. Something will soon have to give, but commentators suggest violence is not an option for Beijing. The Hang Seng was down another 1.2% yesterday. HSBC also released its Chinese manufacturing PMI for September yesterday which at 50.2 was flat on August but shy of last week’s 50.5 estimate.
Japanese industrial production fell 1.5% in August when economists were expecting a rise of 0.2%, which only serves to underscore the difficulty the government is facing in its implementation of much vaunted Abenomics.
Over in Europe, the flash estimate of eurozone September CPI came in at 0.3% as expected. Core CPI, ex food and energy, read 0.7% when 0.9% was expected. With the ECB’s target of 2% seeming but a pipe dream at present markets are expecting more action from Mario Draghi at this week’s ECB policy meeting, hence the euro took another tumble last night. Others argue nevertheless, that having introduced fresh unconventional monetary measures only last month, the central bank will not be looking to act again so soon.
All of the above is adding fuel to the US dollar fire. The yen and the euro continue lower but nervousness surrounding the Hong Kong protests, which we can add to Ukraine and Middle East issues, is ensuring a flow of funds back to the safe haven of the reserve currency as well. Never mind, also, that a Fed rate rise is on the horizon.
The US dollar index is up another 0.3% to 85.92, and has posted its best monthly performance in two years. Along with the Australian stock market, the Aussie dollar has found some support over the past 24 hours and is up 0.4% to US$0.8754.
Given the volatility of the past several sessions, one might have expected something similar for Wall Street’s last trading session of the quarter last night but indeed the opposite was true. There were ups and downs during the day but it was the first time in over a week the Dow didn’t move triple-digits either close-to-close or intraday. The scorecard for the S&P500 is a 1.6% fall in the month of September but a 0.6% gain for the quarter, marking the seventh consecutive quarterly gain.
Economists were rather shocked with the big fall in the Conference Board’s monthly index of US consumer confidence, which fell to 86.0 from last month’s 93.4 (highest since October 2007) when 92.4 was expected. The suggestion was perhaps the accelerating war in Syria-Iraq was to blame but the Conference Board pointed out the biggest fall among the various components was in jobs market assessment. We recall that the August non-farm payrolls number was surprisingly low. We’ll see September’s number on Friday night.
The Case-Shiller 20-city house price index showed annual growth slowed sharply to 6.7% in July from 8.1% in June to mark the slowest pace since late 2012. Glenn Stevens would kill for these numbers. The Chicago PMI has fallen to 60.5 from 64.3 last month, which is no great disappointment given 60 is still a cracking pace of growth. Economists had forecast a fall to 61.9.
So all up last night’s US data were a mixed bag, and nothing to move mountains. Hence Wall Street meandered its way to a tepid quarter close.
While there’s much above to consider with regard commodity prices, right now the biggest enemy of prices is the surging US dollar. Liquidity has dried up on the LME ahead of the Chinese break and while weak European inflation and stagnant Chinese manufacturing are factors, last night’s across the board selling in base metals was mostly greenback driven. All metals fell around 1% except for nickel, which fell 2%.
Over on the oil markets, the impact of the US dollar was also felt along with a Reuters report suggesting OPEC output hit its highest level in nearly two years in September, as renewed Libyan production met high levels from Saudi Arabia and others. Yet again, supposed OPEC quota restrictions are proving little more than a giggle. Brent crude fell US$2.39 to US$94.81/bbl to close the quarter while West Texas fell US$2.89 to US$91.41/bbl to mark a 13% fall over the September quarter.
Gold fell US$7.90 to US$1208.00/oz last night and special mention must go to silver, which fell 2.8%.
Iron ore fell US20c to US$77.50/t where it will now remain for a week.
As noted, the SPI Overnight fell 0.6% or 33 points. Weaker commodity prices are likely an input here but we can assume yesterday’s action on Bridge Street was less bargain hunting and more book squaring. The game begins afresh today.
And it’s a very busy day. In Australia we’ll see retail sales and house prices and the September manufacturing PMI. It might be a holiday in China but you’ll never interrupt a communist calendar so Beijing will also release its official manufacturing PMI.
The eurozone, UK and US will follow tonight with their PMIs, while the US will also see construction spending, vehicle sales and the ADP private sector jobs number.
Rudi will appear on Sky Business this evening at 5.30pm.
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