FYI | Jul 02 2007
By Greg Peel
A 14 point fall in the Dow on Friday belies the fact that the average actually fell over 200 points mid-session. Rallies of 100 points early in the morning and late in the afternoon contributed to the final figure.
Early enthusiasm was provided by the US personal consumer expense deflator (PCE) figure which rose only 0.1% in May. This core inflation measure is closely watched by the Fed. But a strong rally was quickly reversed by news of the thwarted London bombing attempts. The Dow fell heavily and oil for August delivery shot up US$1.11 to close at US$70.68.
The financial sector was again hardest hit as mortgage fears continue. The US ten-year bond was highly sought after however, as is often the case in geopolitical scares. Yields closed at 5.03%. This, along with weekend book-squaring ahead of a holiday-interrupted week allowed the Dow to claw back to the start again.
It’s a busy week for US data which straddle the Fourth of July break. Tonight brings the ISM manufacturing index for June while Tuesday reveals May pending homes sales and factory orders and June vehicle sales. Thursday brings the ISM non-manufacturing index for June and Friday wraps up with the important employment data – June non-farm payrolls, average wages and unemployment rate.
It’s rate decision week in Australia as the RBA meets tomorrow and delivers its verdict on Wednesday. The more hawkish of economists are predicting a rate rise in August but would not be at all surprised if the RBA didn’t act this week instead. There are those, however, who maintain there will not be a rate rise before the election.
In the meantime, we have the Melbourne Institute inflation gauge for June out today, and May building approvals and retail sales out tomorrow. Wednesday brings the rate decision along with the May trade balance and June performance of services index. Then we have two data free days.
Both the European Central Bank and the Bank of England make their rate decisions on Thursday night.
Friday was a choppy and indecisive day on the local bourse and a rise of 8 points in the SPI Overnight on Friday provides little indication. Metals price action was muted as well.
