The Monday Report

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By Greg Peel

And then suddenly, nothing happened.

After a tumultuous few weeks, including many a Monday morning hanging in the balance of meetings in Brussels or new and more desperate initiatives from Beijing, an eerie calm descended upon markets across the globe on Friday as attention turned to rugby/cricket/golf/cycling over the weekend. As it should on a weekend.

The news out of Greece this morning is that the Greek banks are preparing for another onslaught of withdrawals tonight despite pleas from politicians for Greeks to actually deposit money in an act of patriotism. Good luck with that one. The withdrawal limit has not been effectively increased from E60 per day other than to allow E420 per week on the back of fresh ECB emergency funds.

As some VAT increases come into force immediately, the long hard road will continue for the country under ongoing currency controls while negotiators nut out the bailout details and eurozone parliaments prepare to vote. Meanwhile, financial markets can get back to what they would normally focus on, although on Friday it appeared everyone was too exhausted to bother.

Flat

A quick glance at an ASX200 chart confirms the Australian market is where it was at the end of May. What was all the fuss about in between? Friday saw minimal movement amongst sectors in either direction for a flat close in the index, and it appears traders heeded my suggestion it might be a good day for a steak and a couple of reds.

Europe saw a similar session, and the disinterest carried across the pond to provide for a little bit of up and down on the open for the S&P500 before it, too, settled down to a flat close. The big mover on Friday in the US was Google, which closed up 16% after having blown analysts out of the water after the bell on Thursday night with its profit report.

Google is not a Dow stock, but as a tech stock, albeit an old one and one of few tech wreck survivors, its performance provides incentive for the tech-heavy Nasdaq. The Nasdaq subsequently closed up 0.9% on Friday at an new all-time high. The Dow put in a tepid 0.2% or 33 point fall leaving the broad market S&P to split the difference with a 0.1% gain to 2126.

It might have been a one-man-band of a session but it appears Wall Street is ready now to just concentrate on June quarter corporate results. The whole Fed rate hike debate thing has become a bit tiresome, and will likely soon be resolved without much ado.

To that end, Friday night saw the release of the US CPI data for June. A 0.3% increase at the headline represented the fifth increase in succession, and the 0.1% annual rate achieved the first positive headline number since December, indicating the impact of the oil price plunge has now worked its way through.

The core rate, without oil, rose 0.2% for a 1.8% annual rate. This is closer to the Fed’s measure, except that the Fed specifically prefers personal consumption & expenditure (PCE) as its guide.

In other data, housing starts shot up 10% in June, but consumer sentiment measured by Michigan Uni fell to 93.3 from 96.1 a fortnight ago.

The US dollar index is up 0.3% at 97.96 and the US ten-year bond rate is again steady at 2.35%.

Commodities

Indonesian export rules regarding nickel have seen that base metal running up and running back again over the past few months but now there is talk of tin coming in for similar bans. Thus tin jumped 4.6% on Friday night when all other metals were somewhat weaker thanks to the stronger greenback and Janet Yellen’s ongoing talk of a 2015 rate rise. Copper fell 1%.

Iron ore was unchanged at US$50.00/t.

Uncertainty still reigns in oil markets ahead of the Iranian deal being put to Congress but the oils went quiet on Friday, and indeed barely moved. West Texas is down US19c at US$50.78/bbl and Brent is up US6c at US$57.11/bbl.

Gold was the bigger mover on the night. With a Fed rate rise drawing ever closer and volatility subsiding on the Greek and Chinese fronts, gold is now losing its raison d’etre and fell US$11.30 to US$1133.30/oz on Friday night.

The Aussie dropped 0.6% to US$0.7370.

The SPI Overnight closed down one point.

The Week Ahead

There’s little in the way of economic data releases across the globe early this week, allowing US earnings results to take centre stage. Wednesday will then see existing home sales and FHFA house prices in the US, followed by leading indicators and the Chicago Fed national activity index on Thursday and new home sales on Friday.

Friday also sees a global round of flash estimates of July manufacturing PMIs, including those of Japan, China (HSBC), the eurozone and US.

Japan will be closed today and the RBNZ will hold a policy meeting on Thursday.

The minutes of the July RBA meeting are due out tomorrow but nothing much new is expected, particularly given Australia’s June quarter CPI data are due on Wednesday. Economists are looking for an increase in the annual headline rate to 1.7% from 1.3% in the March quarter.

Glenn Stevens will speak in Sydney tomorrow.

The local stock front will be dominated by ongoing resource sector June quarter production reports this week. Highlights include OZ Minerals ((OZL)) tomorrow, BHP Billiton ((BHP)) on Wednesday and Fortescue Metals ((FMG)) on Thursday. Macquarie Group ((MQG)) will hold its AGM and provide FY16 guidance on Wednesday.

Rudi will appear on Sky Business on Wednesday at 5.30pm and on Thursday at noon.
 

For further global economic release dates and local company events please refer to the FNArena Calendar.

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