FYI | Apr 19 2007
By Greg Peel
On February 20, the Dow Jones Industrial Average of 30 stocks closed at 12,786.64. Thereafter followed the “Shanghai Surprise”, in which a brief tanking of the Chinese stock market triggered a collapse exacerbated by deeper risk concerns. After a couple of attempts this week, the Dow finally eclipsed the February level and closed at 12,803.84 last night to set a new closing record. The intra-day high remains at 12,845.76, also achieved on February 20.
The day itself was unremarkable, and a generally positive mood stemming from yesterday’s benign inflation data was unaffected by any new economic data releases. A major driver of the market was, however, an above-expectation result from investment banking giant JP Morgan Chase.
Remember all the panic over the sub-prime mortgage scare? Well that seems to have largely abated now, confirming what cooler heads had believed – that the sub-prime crisis was confined to a minority section of the overall finance market and would not flow through to the top end.
Remember the yen carry trade scare? Well, again, there might have been a brief panic as overexposed hedge funds rushed to correct their positions following the Chinese wake-up call, but again, as cooler heads had believed – the shake-out did not signal a major rush out of carry trade positions altogether. At last weekend’s G7 meeting of finance ministers in Washington it was decided all were comfortable to allow the carry trade market to carry on. Hysterical cries of a global financial collapse were dismissed and it was decided the market could look after itself.
The S&P 500 has also managed to struggle across the line, while the Nasdaq has not enjoyed recent upside. The Nasdaq is not far off returning to February levels, but still a far, far cry from tech boom highs.
Gold also struggled to a higher closing price of US$689.90/oz, finding it difficult once more to sustain a breach of the US$690/oz level. After a solid run recently, traders are not surprised by profit-taking, and last night the US dollar did manage a slight recovery after testing multi-year lows against the euro and British pound. Most analysts agree gold will need to do a lot of work before it can break through the US$700/oz level once more.
All base metals underwent somewhat of a pullback last night after spectacular gains the night before. The SPI overnight is only showing down 1 point, suggesting there may not be any significant slide today as the Aussie bourse continues to push into blue sky. Takeover activity is just too rampant.