Daily Market Reports | Dec 22 2014
By Greg Peel
There was no holding back the Australian market on Friday. And this time it wasn’t just about bargain hunters in energy and materials stocks. Having risen 280 points on Wednesday night, the Dow rallied 420 points on Thursday night, its biggest move in three years, confirming Wall Street’s endorsement of the Fed’s approach to the first and subsequent rate rises – patient, and then measured.
So with many participants pulling stumps for the year on Friday, some wanting to push that index as high as possible for end-of-quarter returns, and the rest just looking to get back into the market ahead of 2015, every sector was a winner. While materials were indeed up again (3.1%) and energy continued its rebound (2.4%), the star of the day was actually industrials (3.3%).
The good news, too, is that the Aussie did not go with it, suggesting mostly localised buying. The Aussie is steady this morning from Friday morning at US$0.8154.
There’s no reason to expect today will bring any Christmas party hangover, with Wall Street holding its ground on Friday night and oil prices enjoying a solid rebound.
In what proved to be a quiet US expiry session on Friday night, probably because most traders would have squared up ahead of the Fed instead of taking the risk, the Dow closed up 26 points or 0.2%, the S&P gained 0.5% to 2070 and the Nasdaq added 0.4%.
Oil prices initially plunged in Friday night’s session, responding to comments from both Saudi and UAE representatives defending OPEC’s decision not to cut production. There may have been an assumption in some quarters that even OPEC did not expect such a sharp plunge in the oil price in response to the bloc’s refusal to budge, and hence a rethink would transpire. So reiteration sparked even more selling.
But last week oil analysts began to suggest that even on current levels of increased global supply growth and waning global demand growth, the fall in the oil price was looking overblown. We saw the more bold of the buyers standing against the tide late last week, and then on Friday they clearly said enough is enough. In they piled, setting off a short-covering rally. West Texas rose US$1.81 or 3.3% to US$56.52/bbl and Brent rose US$2.44 or 4.1% to US$62.05/bbl.
Given the link between oil prices and metals prices via commodity funds, metal prices have been following oil prices fairly closely of late, at least in direction if not in magnitude. If Friday’s rebound in oil was assisted by commodity fund buyers, it was evident on the LME. Copper rose 1.3% and zinc rose 2% in a session where all metals bar aluminium saw gains.
Iron ore rose US$1.50 to US$69.50/t.
The gains in commodity prices came despite the US dollar index rising 0.4% to 89.61. Gold remains undecided about it all, again steady at US$1195.40/oz. And the US bond market wound down its volatile week with a 3 basis point fall in the ten-year yield to 2.18%.
The SPI Overnight closed up 19 points or 0.4% on Saturday morning.
We now move into the holiday shortened week, which sees all the of Anglo-European world closed on Thursday and Friday, except for the US, which is actually open on Friday for all those who drew the short straw at the office.
Japan likes to do its own thing, so Japanese markets are closed on Christmas Eve before the minutes of the last Bank of Japan meeting are published on Christmas Day and Boxing Day sees the monthly dump of industrial production, retail sales and unemployment data.
Despite being open on Friday, the US will get through as many monthly data releases as it can before Christmas Day. Hence tonight we’ll see the Chicago Fed national activity index and existing home sales, and tomorrow night it’s new home sales, FHFA house prices, durable goods, personal income and spending, the Richmond Fed manufacturing index and the final Michigan Uni consumer sentiment survey for the year.
Tomorrow night the US will also see the final revision of the September quarter GDP, that is unless the first estimate of December quarter GDP, due next month, brings with it another revision. Economists are expecting the number to be revised up to 4.3% from the last revision to 3.9%.
There are no Australian data releases of any note this week. On Wednesday, Christmas Eve, the ASX will close at 2.10pm Sydney time.
On Wednesday night, the NYSE will close at 1.00pm NY time.
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