FYI | Sep 27 2006
By Greg Peel
A measure of consumer confidence rebounded from nine month lows to be higher than expected on release in the US overnight. While such measures rarely correlate accurately with resultant consumer spending numbers, Wall Street didn’t need much to spur another decent rally.
The Dow Jones closed up 94 points to 11,669 to add to yesterday’s gain of 67 points. The 0.8% move was broad-based, and accompanied by a 0.75% in the S&P500. Having surged yesterday, the Nasdaq scored a more modest 0.5% rise.
The Dow is now within 60 points of the record set in 2000 just before the tech boom tipped over.
Oil stabilising at around the US$60/bbl level and lower bond rates due to the easing of inflation fears are providing the impetus for Wall Street’s buoyant mood. Fed comments yesterday that the economic slowdown was not necessarily as dire as thought has also eased tension.
Is it a case of back to business? There is still many a respected economist calling a recession in the US, while others laugh at the “perma-bears” and consider the US economy an impenetrable force.
Renewed confidence has also caused the US dollar to move higher over the last couple of days. At the same time, gold has inched higher in contravention of the usual relationship. Gold futures in New York took a brief run at the US$600/oz level last night before failing and falling back into the range. That gold would defy the US dollar suggests buyers are emerging to take advantage of oversold conditions.
Boosting the buyers’ cause was news on Tuesday night that India is expected to import 10% more gold during 2006 compared with the 2005 total of 720 tons, according to a representative of the Gem and Jewellery Export Promotion Council. We have also now passed the deadline for European central bank gold sales, so that overhang is now removed.
Base metal prices all closed slightly higher overnight, and the SPI overnight showed a 55 point rise. This should put a break on the resources sector sell off for at least today, allowing takeover activity in the industrials sector to gain the focus.