FYI | Nov 28 2006
By Greg Peel
Thanksgiving was on Thursday, so it was an unofficial four-day weekend for Wall Street. When traders returned, bloated and rather worst for wear after toasting 18 records set in the Dow recently, they found a US dollar which had broken down and fallen for five consecutive days.
What really spooked the market, however, was news that Wal-Mart sales had retreated 0.1% year-on-year. While this doesn’t seem like much, Wal-Mart sales are never known to retreat. The scene is thus set for what might be a disappointing Christmas for retailers, particularly as a discounting mentality has hit the majors. For Wal-Mart to prop up a share price that has run hard recently, job losses are now expected.
The Dow closed down 158 points or 1.3% to 12,121. The S&P500 was down 1.4% and the Nasdaq 2.2%.
While fears of a tough economic slowdown are beginning to hit home, other observers are non-plussed, seeing such a retraction as a healthy pullback in an otherwise strong market. Wall Street can’t keep breaking records every day.
The oil market continues to be volatile, with WTI rising US$1.08 to close at US$60.32/bbl. Just when it seemed US inventories were more than expected, and a fall through US$55/bbl was on the cards last week, an Iraqi oil facility has been attacked. Further pressure was added by Saudi Arabia suggesting it might consider further production cuts.
This just goes to reinforce two home truths:
(1) It is dangerous to call the oil price significantly lower when the spectre of Middle East tensions hovers daily. It is easy to become blasé about goings on in Islamic oil nations, given its “old news” status, but Iraq is deteriorating, Iran has not resolved its nuclear problem, tensions are rising between Lebanon and Syria and Nigeria continues to be a basket-case.
(2) The Saudi Arabians are complete ******* artists and cannot be trusted to provide any information of veracity. One minute it announces production cuts, the next minute it ignores them, and the next minute it announces more. It also suggest it has more oil than it knows what to do with, while reserve estimates have not changed for twenty years, and no one, but no one, is allowed in to the oilfields to verify. Oh how the sheiks must laugh as they pull the oil market strings.
The gold market has eased higher again having jumped significantly on the US dollar breakdown. This has been achieved in the face of suspected selling of annual quotas from European central banks, which is seen as a bullish sign from all and sundry Christmas jewellery buying from Asia is also providing a fillip.
Gold finished at US$639/oz overnight. The silver price continues to eke up, reaching US$13.50/oz, while platinum continues on its wild ride, falling by 4%.
Nervous sentiment will be tested on the local bourse today, as the SPI overnight has fallen 57 points but the market is waiting for the private equity cavalry to snap something else up. I put in an ad to sell the Harbour Bridge and I’ve had some pretty good offers.