Daily Market Reports | Apr 24 2015
By Greg Peel
The Dow closed up 20 points or 0.1% while the S&P gained 0.2% and the Nasdaq added 0.4%.
Material Moves
HSBC’s flash estimate of its reading on China’s April manufacturing PMI came in yesterday at a one-year low 49.2, down from March’s 49.6 which was also where April forecasts sat. On any other day, such a result would have led to weakness in Australia’s resource sectors, but with belief growing that we’ve seen the bottom in oil prices and expectations that the same may be true for iron ore, as the majors start to ease back on their expansion plans, the PMI reading didn’t much matter yesterday.
We might also consider weak Chinese data to currently evoke a benign response from markets given Beijing’s clear indications, via last week’s big RRR cut, that it is prepared to pump up the stimulus as required. Thus Wednesday night’s moves up in the oil and iron ore prices were enough to promote a 1.1% rally in the local energy sector yesterday and a 1.3% rally in materials.
The ASX200 nevertheless closed almost flat on offset falls in supermarkets (0.5%) and financials (0.3%). The fall in financials doesn’t seem like much but we must remember that since the de-rating of Australia’s resource sector, the banks and other financials now account for almost half the market cap of the index. Insurers are included in the financials sector, and they continue to see fallout from the NSW east coast storms.
Grexit Games
It was not a good 24 hours globally for estimates of April manufacturing PMIs. Japan’s PMI fell to 49.7 from 50.3 in March to mark the first slip into contraction in eleven months. The eurozone saw the first decrease in two months to 51.9 from 52.2 when economists had forecast 52.6, helping the German DAX index to fall 1.2% overnight. And the US equivalent dropped to 54.2 from 55.7.
EU leaders held a summit in Brussels overnight to discuss the issue of migrants, and the Greek prime minister took the opportunity to have a quiet word to the German chancellor. The two reportedly spoke about how to keep Greece in the eurozone, but separately the German finance minister appears resigned to a Greek exit.
The EU finance ministers meet in Latvia tonight where Greece is obliged to present a list of reforms it plans to carry out in order to satisfy its ongoing bail-out conditions, but the German ministry will apparently be surprised if anything actually is presented.
Nasdaq Milestone
Having reconquered the 5000 mark for the first time in fifteen years earlier this year, the US Nasdaq index last night surpassed its previous all-time high of 5048 set in March, 2000, with a close of 5056. This sparked a lot of buzz on what was otherwise a wobbly performance from Wall Street. The Dow was up over 90 points at one stage before settling back to a small gain. The S&P500 kissed its March all-time high before retreating.
Proctor & Gamble (Dow) blamed the strong greenback for its March quarter earnings miss, and fell 1.8%. Poor results were also posted by General Motors (down 3.3%) and Facebook (down 2.6%) while Caterpillar (Dow) surprised to the upside but closed flat, and eBay was a winner with a 3.8% gain.
Results reported after the bell faired a lot better, providing for a potential boost on Wall Street tonight. In aftermarket trading, Microsoft (Dow) is up 3.1%, Google 3.5% and Amazon 5.9%.
US new home sales fell 11.4% in March to mark the slowest pace of growth since November. The result came as a disappointment after Wednesday night’s 6.1% jump in existing home sales. New home construction is economically stimulating but the swap of old houses doesn’t do a lot. Wall Street is also a little worried that weekly new jobless claims have been quietly ticking up these past three weeks.
But that only suppresses thoughts of an early Fed rate rise, so last night the US dollar index fell 0.8% to 97.30 and the US ten-year bond yield fell back 2 basis points to 1.95%. Speaking of bond yields, the German ten-year has rocketed back over 100% this week. Mind you, a move from 0.08% to 0.17% doesn’t actually move the dial much.
Hot Iron
The spot iron ore price has posted its sixth consecutive rise, gaining another US90c to US$53.80/t. Happy days are here again. Well, a little bit.
LME traders weighed up the weak Chinese PMI, and weak PMIs globally, and the drop in the US dollar before deciding, as I had suggested last week, to stick to individual metal fundamentals. Hence copper rose 0.8% while aluminium fell 1.4%, lead was down, nickel was up, and tin and zinc were down.
Iron ore might be grabbing the spotlight right at the moment, but last night the oils hit 2015 highs. Renewed Saudi airstrikes on Yemen, lower than expected weekly US crude inventories and expectations China’s weak PMI will lead to further stimulus sent West Texas up US$1.25 to US$57.44/bbl and Brent up US$2.05 to US$64.73/bbl.
The fall in the greenback helped gold to push back towards the safety of its 1200 Linus blanket, with a US$7.20 gain to US$1193.70/oz.
Today
While strong aftermarket US earnings reports may have played a part, ongoing commodity price gains are likely the reason behind a 31 point or 0.5% gain for the SPI Overnight.
Outside of the EU finance ministers meeting in Riga and a possible further step towards a Grexit, tonight sees US new durable goods orders.
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