Daily Market Reports | Mar 06 2015
By Greg Peel
The Dow closed up 38 points or 0.2% while the S&P gained 0.1% to 2101 and the Nasdaq added 0.3%.
Local Market
The ASX200 spent most of yesterday down between 20-30 points until kicking late in the session to a flat close. We must remember that just about every day this month the index will start the session with a handicap, depending on the number and size of ex-dividends on the day.
No sector stood out much yesterday other than consumer staples, which belied a weak retail sales result for food retailing. The bargain hunters are chasing Woolies.
January retail sales came in at a solid 0.4% growth, ahead of 2014’s monthly average 0.2%. Food retailing was down, down 0.7% while in what has become an entrenched trend, cafes & restaurants took the blue ribbon with 3.6% growth. This includes fast food, which thanks to FTAs and global demand for Australian produce, is much cheaper to buy than fresh food at supermarkets. If Joe wants to wave around his intergenerational frighteners, what about the growing cost to the taxpayer of unchecked obesity?
January’s trade balance data were a clear indication of the impact of the lower Aussie. The trade deficit blew out because the dollar value of imports rose 3.0% while exports rose only 1.3%. The lower Aussie is making imports more expensive while providing a buffer for exports in the face of lower commodity prices.
RBA Deputy Governor Lowe made a speech yesterday confirming the central bank’s easing bias, although he did point out the board did not see a deterioration in activity, rather a lack of recovery. Meanwhile the Chinese premier opened the parliamentary session for the new year with a 2015 GDP growth target of 7.0%, down from 2014’s target of 7.5% and result of 7.4%.
After a burst of short-covering following Tuesday’s lack of RBA rate cut, yesterday’s Chinese news was enough to send the Aussie back down to US$0.7772, or 0.7% lower. However the 7.0% target will not come as a shock to economists, many of whom have to date been forecasting numbers in the sixes for 2015, notwithstanding expected PBoC stimulus initiatives over the year.
Euro Plunges
Mario Draghi outlined his plans for eurozone QE last night as expected but his press conference was upbeat, revealing that the ECB had upgraded its zone economic growth forecasts to 1.5%, 1.9% and 2.1% in 2015-17 given more encouraging recent data. The euro initially rallied on this news but it was the Q&A session which sent the currency plunging to a twelve-year low against the US dollar.
Draghi indicated that the QE bond buying program would not include bonds with yields lower than the central bank’s own deposit rate of minus 0.2%. As a lot of shorter end eurozone bonds are already trading below this level, the ECB will have to go further out the maturity curve with its purchases. This will force down longer rates, and force Europeans to look offshore for longer term yield, implying the sale of euros.
The US dollar index jumped another 0.5% last night to 96.39.
Wall Street Waits
Heavy snow in New York may also have played a part but volumes were very low on the US exchanges last night ahead of tonight’s US jobs numbers. While economists are expecting a solid 238,000 jobs added there’s now talk the February snow may ensure a weaker number, albeit this would correct down the track.
US factory orders data were released last night and showed a 0.2% drop in January to mark six consecutive months of drops. While jobs are a key measure for the Fed, Wall Street is looking at other not so encouraging data releases of late and looking at the surging US dollar, courtesy of monetary easing all over the rest of the world, and worrying about the implications for globally-oriented US stocks.
Iron Ore has a 5
The new Chinese growth forecast of 7.0% has not inspired confidence in the iron ore market. The spot price has fallen US$2.80 or 4.5% to US$59.30/t.
LME traders appeared to be more encouraged by the upgraded eurozone growth forecasts than they were by the Chinese downgrade, with lead, nickel and tin all rallying around 1.5%, while the others were flat.
It was a quieter night in oil markets. Having shot up on Wednesday night for dubious reasons, last night West Texas fell back US87c to US$50.81/bbl while Brent was little changed at US$60.65/bbl.
Gold is also little changed, at US$1199.40/oz.
Today
The SPI Overnight closed up 4 points.
Australia’s construction PMI is out today and over the weekend, China will release February trade data.
The eurozone will offer a revision of its initial December quarter GDP estimate tonight but the biggie will, as always, be US non-farm payrolls.
With the snow tumbling down in the north east, the US will move into summer time over the weekend so as of Tuesday morning, the NYSE will close at 7am Sydney time.
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. www.fnarena.com
