FYI | Jan 24 2007
By Greg Peel
The morning session at the NYSE featured a fickle market deciding profit expectations weren’t quite so overly ambitious as was assumed as late as yesterday, but the driver of the market overnight was a pre-empting of President Bush’s State of the Union address which will air this morning our time.
As chill winds began to whip around the White House, indications were made that (Iraq aside) the focus of Bush’s first address to a hostile Congress would focus on energy. A return to seasonal cold weather in the States has seen the oil price halt its slide, but notice that Bush would announce the doubling of the Strategic Oil Reserve sent the Nymex crude price surging up US$2.30 or 4% to US$54.88/bbl.
On a more rhetorical note, Bush wants to slash US fuel use by 20% by 2017, through greater efficiencies and the greater use of ethanol. This is good news for already surging grain stocks (including local grain stocks).
An uncertain gold market found renewed vigour on the oil price rally and shot back up to US$646.20/oz – a US$14.00 rise. Funds buying was touted as the main driver and technical watchers are again confident that a break of US$648 will see a price of US$676. Silver also rallied hard to close at US$13.20/oz.
The energy sector also led up the Dow to close 57 points higher at 12, 534.
Base metals continued their strong return to favour with nickel leading the charge – up another 2.5% in New York. Aluminium was up 1.5% and copper 1%.
The local market has been running rather hard of late but it’s difficult not to see another strong rally today, with the SPI Overnight closing up 44 points. The only spanner in the works could be the CPI, due out this morning. Anything more than a modest increase in the RBA’s underlying inflation measure would trigger confirmation of a February rate hike and a probable reverse in the stock market’s fortunes, at least in the short term.