Daily Market Reports | Jun 17 2015
By Greg Peel
The Dow closed up 113 points or 0.6% while the S&P gained 0.6% to 2096 and the Nasdaq added 0.5%.
Mirror
Yesterday’s trade on Bridge Street was largely a mirror image of Monday’s trade. On Monday the index fell sharply from the open only to graft back to a close of down 6 points. Yesterday the index opened sharply higher only to drift back to a close of down 6 points. Clearly there is not a lot that is clear to traders at present.
What was clear was a financials sector buffeted yesterday by a foreign invader. And bargain hunting in the banks continues to boot. What remains inexplicable is ongoing volatility in the utilities sector, which should be arguably the least volatile sector in the market. It rose 1.0% yesterday to post the largest sector gain, having fallen around a percent on Monday and risen around a percent on Friday while the index has not much moved.
The last two days’ trading suggests the local market is not prepared to either sell down or buy up dramatically while we have two potential volatility-producing events to consider this week, being the FOMC meeting and Greece. But having said that, last night Wall Street regained no more than what it lost on Monday night yet this morning the SPI futures are up an extraordinary 46 points.
Someone’s been on the red cordial.
The minutes of the June RBA meeting, released yesterday, were far from startling. There was nothing in them the June statement did not convey. The bottom line is the board intends to remain “accommodative” but having cut in May, any further move will depend on more data in the interim.
As for “crazy” Sydney house prices, the June minutes reiterated previous RBA commentary that “conditions in the housing market in Sydney and parts of Melbourne had remained very strong, though trends were more mixed in other cities,” suggesting the housing “bubble” is not an impediment to another rate cut, should one be deemed necessary.
Reversal
There was no new news on the Greek front last night other than an outburst from the Greek prime minister, who accused his creditors of pandering to the IMF for political gain and attempting to “humiliate an entire people that has suffered in the past five years through no fault of its own”.
No fault of its own? Systemic tax avoidance, corruption and bold-faced government book-cooking? Pull the other one Tsippy, it plays Nana Mouskouri.
But while it seemed that everyone worried about a possible Grexit and the fallout therefrom held sway in global markets on Monday night, last night it was the turn of those either believing, as many still do, a compromise will be reached or those believing any Grexit fallout would be minimal. Wall Street last night reversed its losses from Monday night, following modest rebounds on European bourses.
A 4 basis point drop in the US ten-year yield to 2.32% suggests the US bond market may still be concerned, but then given the big sell-off in bonds this month, it is just as likely the market is squaring up ahead of tonight’s Fed statement and press conference.
Wall Street’s economic data release of the day was difficult to read much into. After surging to their highest monthly pace since 2007 in April, US housing starts fell 11.1% in May. But permits, which are required before starts, rose 11.8% in May to, again, represent the fastest pace since 2007.
Traders largely fobbed off the numbers, noting housing start/permit data are notoriously volatile and subject to significant revision.
Adding some fuel to Wall Street’s fire last night was talk of a bit of an M&A frenzy in the health insurance space. Of five roughly equivalent insurance names, two pairs are rumoured to be in merger talks with each other but the fifth is not necessarily to be left out either.
Commodities
Global stocks market may have shrugged off Greece last night but LME traders didn’t, sending base metal prices southward for another session. Copper was down 1.3% on the day amongst moves of 0.5-1.5% down for all metals bar nickel, which fell 2%.
Is the iron ore rebound honeymoon over? Certainly market analysts have been warning investors not to expect the snap-back rally to be sustained. Last night iron ore fell US$2.40 to US$62.10/t.
Having risen by US$4.60 this time yesterday morning, this morning gold is down US$4.60 to US$1181.60/oz.
The spread reversal between the oils continued last night with West Texas trading up and Brent down, but given Brent rolled into the August front month delivery contract last night the spread will be off kilter until WTI follows suit next week. July WTI rose US45c to US$60.07/bbl last night and August Brent fell US21c to US$63.74/bbl.
Commodity prices were little impacted by a slight move up in the US dollar index to 94.92, while a lack of anything surprising in yesterday’s RBA minutes means the Aussie is a tad lower at US$0.7753.
Today
As noted, the SPI Overnight closed up 46 points or 0.8%.
Tonight the Fed will release its June policy statement and Janet Yellen will front the press. As an indication of just how uncertain Wall Street was about when the next rate rise might be, this morning on CNBC saw a floor trader suggest “not this year” while two fund managers agreed the first rise will come in September, followed by another in December, and four more in 2016.
But one of those fund managers suggested the Fed doesn’t know either, at this point. We can only hope Janet Yellen does actually set a date tonight so we can all get on with life, but she will likely just keep the ball in the air.
Rudi will appear on Sky Business' Market Moves today (5.40-6pm) and then later host Your Money, Your Call – Equities on the same channel, 8-9pm.
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