Daily Market Reports | Mar 13 2015
By Greg Peel
The Dow rose 259 points or 1.5% while the S&P gained 1.3% to 2065 and the Nasdaq added 0.9%.
Back to Normal
Yesterday’s 1% rally in the ASX200 suggests impatient buyers were not prepared to wait around for any further pullback, with yields in the banks, for example, and the telco, becoming too tempting once more. Energy found support on a kick in the Brent price but the materials sector remains in the doldrums care of an ominously weak iron ore price.
Yesterday’s jobs data for February were relatively benign, providing no cause to alter views on RBA policy. April remains an outside chance for another rate cut although economists favour May, at which point March quarter inflation data will have been released.
Around 15,000 jobs were added in February, matching an equivalent fall in January. The unemployment rate fell back to 6.3% from 6.4% because of a drop in the participation rate. The RBA remains of the belief unemployment will grind slowly up to a peak of 6.5% and this report does nothing to challenge that forecast.
But it would appear a few punters playing the Aussie to the short side were caught out. The drop in the unemployment rate, when perhaps another rise might have been expected, sparked a short-covering rally that sees the Aussie back up a full 1.5% to US$0.7708, after what now seems a very brief visit into the 75s.
The weak Chinese data released on Wednesday night appeared to be brushed aside yesterday, and news that Chinese new loans and money supply surged in February painted a somewhat brighter picture.
And Talking About Rates…
The Aussie’s bounce-back was exacerbated by a 0.4% pullback for the US dollar index last night to 99.27, following its recent surge. If the mood on Bridge Street was one of stocks are still the best investment, it was clearly echoed on Wall Street last night.
Wall Street changes its mind from week to week about whether the Fed will raise earlier or later, and up until last night the general belief was that the word “patient” would be dropped from the FOMC statement next week, clearing the way for the first post-GFC policy shift. Fear of a too-early rate rise has sent US stocks south in March but last night’s retail sales data swung the pendulum the other way once more.
US retail sales fell 0.6% in February, belying forecasts of a 0.3% gain. Heavy snow across a lot of the country was blamed for the weak result but sales have fallen now for three consecutive months, for the first time since 2012. Many a US GDP forecast has been predicated on expectations the robust sales growth seen in the December quarter would kick on in the March quarter thanks to the tailwind of lower fuel prices. Snow or no snow, this does not seem to be the case.
So now we’re back to assuming the Fed won’t rush in, and indeed perhaps there is cause to remain “patient” with regard monetary policy.
The US bond market did not much react, however. Weakness in European bond yields had already dragged the US ten-year rate back down following its earlier jump on rate rise fears, thus only a one basis point fall to 2.10% was the response.
Metals Bounce
The sudden drop for what had been a rocketing greenback caught out traders on the LME. Having been beaten down on the rising dollar recently, all base metal prices bar tin saw gains last night with copper shooting up 2%.
Iron ore managed a US20c gain to US$57.90/t but gold was steady at US$1153.00/oz.
The dollar correction did little to spur on trade in the oil markets nonetheless, where traders were still coming to terms with the reality of record weekly US supply data. West Texas fell US$1.28 to US$47.05/bbl and Brent fell US66c to US$57.22/bbl.
Today
One might suggest the local stock buyers timed it rather well yesterday. The longer the Fed holds off raising rates, the longer Australian stocks remain attractive to US investors. But given yesterday’s solid 1% rebound, the SPI Overnight has only posted a 13 point gain.
More grist for the US interest rate mill will be provided tonight with the release of the February PPI. The fortnightly consumer sentiment survey will presumably throw light on the weak US retail sales numbers.
And once again it is Friday the thirteenth.
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