Daily Market Reports | Aug 02 2008
By Greg Peel
The Dow fell 51 points or 0.5% while the S&P and Nasdaq each fell 0.6%.
All things considered, and given the volatility levels of the week, it was a pretty reasonable response. The data flow kicked off with the July jobs figure which, at -51,000 was slightly better than the -70,000 expected. The Dow started the session slightly higher, but then quickly collapsed to be down over 100 points.
Total jobs lost since December now stand at 463,000 – enough for many commentators to call a recession – and unemployment ticked up in July from 5.6% to 5.7%. The last three quarters have seen US GDP grow by -0.2%, +0.9% and +1.9% but the latter figure was much boosted by stimulus cheques, and is also subject to revision for another six months. Recession or no recession? Who cares about semantics?
The Institute of Supply Management index for July came in at 50.0, which marks the crossover point from expansion into contraction. However, purchasing management indices in Europe, the UK and China registered 47.4, 44.3, and 48.4 respectively, with the latter falling under 50 for the first time since January 2005. Never mind the US – the world is contracting.
But back Stateside, while no one was exactly expecting General Motors to put in a particularly good performance in the second quarter, a US$15.5bn loss still came as a shock. Adjusted for a one-off item, GM registered an EPS of minus US$11.21. The market was expecting a loss of US$2.85. Crashing sales of trucks and SUVs were to blame, and while other US exporters have seen a boost from a weaker US dollar, GM copped losses abroad as well. Funnily enough, no one else wants to buy trucks or SUVs either.
The US dollar rallied early on the better jobs number, but faded as the day went on, balanced out by weakness in Europe. Oil fell over US$4 initially, until the man who most expect to be the next prime minister of Israel got his jollies once again by noting that Iran was close to a breakthrough in its nuclear program, and that “our red line is that uranium enrichment should not take place on Iranian soil”. So up we went again, to finish the session US$1.02 higher at US$125.10/bbl.
The stock market nevertheless fought back over the session, and was close to square at 3.30pm. The last half hour saw a 50 point slide. All up it was a slightly positive day in the financial sector.
On a slightly stronger US dollar, gold fell US$3.50 to US$909.70/oz. The world has now responded more definitively to signs of an Australian economic slowdown and growing expectation of interest rate cuts, not to mention the Chinese data, and the Aussie fell over a cent to US$0.9294.
With global weakness in focus, it was not a good day on the LME. Aluminium fell 1%, copper 2%, and lead and zinc over 3%.
The SPI Overnight fell 38 points.
