Daily Market Reports | Jan 30 2008
By Greg Peel
There’s no point in discussing much further whether the Fed will or won’t. The market is looking for 50, and less than that should prove disappointing. It should be noted that the next scheduled FOMC meeting after this one is not for a full two months, if that makes any difference. But then the last cut was an emergency one anyway.
The market is cautiously confident it will get its 50 points, evident in another positive day’s trading. Financials were an obvious star but it was an across the board rally that took the Dow up 96 points or 0.8%. The S&P added 0.6% and the Nasdaq 0.4%. Tech stocks have struggled in 2008, no more noticeable than in last year’s market darling Google, which has lost 22% this year. This reflects the general shift of funds out of 2007’s better performers and into 2007’s horror stories, such as financials, builders and retail. The market is looking for extraordinary gains off bargain prices from here on, and techs have already had their run.
There was some surprisingly good economic news out last night. Durable goods orders – that is big-ticket items from fridges to machinery – rose 5.2% in December, the biggest gain in five months. Recession? What recession? One might argue this provided the impetus for the session’s positive bias, except that such a number could make the Fed think twice about 50 points. Such is the paradox, and one could go quite potty trying to figure it out.
There was also some poor housing data out from the Case-Shiller team, but as it was November data its a bit of a no-brainer. The House of Representatives passed Bush’s US$150bn economic stimulus package without incident, although the Senate is apparently not going to be quite so meek. There are some alternative ideas around, according to reports.
Everyone’s favourite mortgage lender Countrywide posted a US$422m quarterly loss which was twice as bad as the Street had anticipated, but it seems the market’s beyond caring now. Countrywide’s shares finished higher on the day.
It was all quiet on the US dollar front, with the Aussie moving imperceptibly. Gold slipped back US$6.30 to US$922.90/oz after its big move up yesterday. Oil edged up another US65c to US$91.64/bbl in uneventful trade.
But it was the base metal market that saw all the action last night. With a couple of positive days on Wall Street, metals have edged back towards important moving averages. Thus last night a wave of technical buying appeared, bolstered no doubt by the durable goods figure in the US and also supported by some supply-side disruptions to production in Asia and Africa. And a 50 point cut would also be positive.
Usually sleepy aluminium suddenly surged 5% in London, copper and zinc added around 4%, while lead and nickel were up 3% and tin 2%. This will bring a smile to the faces of Australian pure metal stock investors, who have to date had a bit of a harrowing 2008.
A cautious SPI Overnight added 42 points, turning around what was a pretty weak day on the local bourse yesterday. Yesterday Australia caught up to weakness in the Asian session on the holiday Monday, noting that Friday-Monday trade in the Dow was an effective net zero. Asia rallied back slightly yesterday, but Australia has been a volatile market these last weeks and a bit of a pullback is no huge shock. Metals should provide at least some impetus today, although the Fed decision looms.
They’ve caught Monsieur Kerviel, the rogue of Paris, and he has suggested SocGen management knew all about his capacity to fiddle the books but were unperturbed when the profits were rolling in. “How could they not have known?” asked Kerviel. “He’s a liar and a cheat”, huffed management. Oh this will be fun.
