Daily Market Reports | Mar 30 2010
By Greg Peel
The Dow closed up 45 points or 0.4% while the S&P added 0.6% to 1173 and the Nasdaq gained 0.4%.
Greece wasted no time in testing the waters once more on requisite debt issuance following last week's ratification of a combined EU-IMF rescue plan. Prior to last week the Greek prime minister warned his treasury may not be able to sell further debt to fund the budget, but last night the market absorbed 5m euros of seven-year bonds, enough to keep Greece going for the month of April.
There's a long way to go yet.
The bonds were costly for the government, settling at a yield of around 6% compared to a 2.7% yield on the equivalent German bond and an ECB cash rate of 1.0%. But the issue relieved the wider market, sending the euro higher and the US dollar index down 0.4% to 81.28. And the relief, it seemed, was also a red rag to a certain bull.
Commodity traders have backed away from the “reflation trade” of late given the uncertainty surrounding Greece, its potential impact on the euro and subsequent potential strength in the US dollar. Commodity prices have been fluctuating with little commitment. But the successful Greek bond issue was enough for commodity funds to come rushing back into the market last night, noting that Wednesday night's session brings the end of the month and of the quarter and for many, particularly in the UK, the end of the financial year.
Base metals surged in London. Nickel was up 1%, lead and tin up 2%, aluminium up 3% copper up 4% and zinc up 5%. Copper's rise was also assisted by a 6.2 aftershock in Chile late Friday.
Oil jumped $2.17 or 2.7% to US$82.17/bbl. Oil's rise was assisted by some concern over the Russian terrorist attacks and all commodities received an extra boost from reports a Chinese state media outlet has put first quarter growth at 12%.
Silver jumped 3% but gold managed only a US$4.10 to US$1110.80/oz. Gold reacted simply to what was only a small move down in the dollar index, given it is primarily a currency rather than a commodity. While dollar weakness assisted commodity price increases, their magnitude told a different story.
The Dow was subsequently up 66 points before midday as materials and energy stocks led the charge. But activity tapered off in the afternoon and Wall Street went quiet as many traders left for Passover celebrations.
The indices also had to face the headwinds of a weaker financial sector. Citigroup fell 3% as the US government confirmed the long-rumoured commencement of divestment of its TARP-related stakes in financial institutions. The government owns around 27% or 7.7m shares in Citi and will begin a slow and steady sale process which will involve taking a percentage of any day's activity and will not involve chasing the market down. The sale should net around US$7bn for the American taxpayer and could last to the end of the year.
There was nevertheless no mention of whether or not the government would reimpose short-selling bans for the period of the divestment, as had been rumoured. The rumours caused many hedge funds to buy back their short positions a couple of weeks ago, forcing Citi shares, and also shares in the likes of Fannie, Freddie and AIG, to spiral higher.
Last night's economic data releases in the US featured the Dallas Fed manufacturing index and national personal expenditure and income measures. The Dallas index swung from minus 0.1% in February to 7.2 this month to mark its fifth straight gain and its highest reading in two years.
Wall Street is keeping an eye out for Thursday's ISM manufacturing index as a key indicator of whether strength is being maintained in the US economy. More important will be Friday's unemployment data, given economists expect 200,000-plus new jobs to have been created last month.
Personal spending increased by 0.3% in February, in line with economist forecasts. Income growth was flat however, which does not bode well for spending going forward. Most of the income cut pain was felt in – would you know – the manufacturing sector.
The slightly weaker US dollar and the big jump in commodity prices put a rocket under the Aussie, which added one and a third cents to US$0.9176.
The SPI Overnight was up 16 points or 0.3%.
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