Daily Market Reports | Jun 17 2010
By Rudi Filapek-Vandyck
Investors curious about what happened last night might as well take all closing prices for equities, currencies and commodities from Wednesday and add a few points either side, because that is exactly what happened overnight.
Equities and commodities initially tried to extend their winning streak, but as the Northern Hemisphere's Wednesday's trading sessions matured, it became obvious investors preferred to lock in the gains made over the past week, and so all markets retreated.
When the closing bell rang on Wall Street, the Dow Jones Industrial Average had managed to hold on to a gain of 4.69 points at 10409.46, pretty much unchanged in percentage terms. The Nasdaq Composite Index edged up 0.05 point, which is also pretty much non-existent in percentage terms.
The S&P 500 slipped 0.1% as consumer related stocks declined, offset by gains in utilities and technology stocks (Apple had some promising signals to communicate).
As far as the news was concerned, it proved a day of more anxiety about financial problems in Europe, BP succumbing to US presidential pressure and some shocking economic data. Insofar that some market commentators have been asking why and how exactly this market did manage to prevent another day of losses.
It's probably a case of “we want a rally, and we will have one too”.
Following on from a tough speech by US President Obama, BP agreed to set up a US$20 billion fund to compensate victims of the oil spill. The company also said it will suspend its dividend for the rest of 2010.
BP's share price recovered slightly last night, but it is still down 46.5% since the April 20 explosion of an offshore oil rig that led to the massive spill in the Gulf of Mexico. In case anyone had forgotten: this spill has yet to be closed off.
There were also plenty of rumours surrounding European banks and governments. Banks in Spain are in worse shape than officially acknowledged – according to market rumours that is. European decision makers are working on a financial bail-out of the Spanish government – according to market rumours that is.
The latter rumour was vehemently denied last night, but where there is smoke…
The spread on yields for Spanish bonds over German bonds hit its highest level since the creation of the euro. The latter slipped to US$1.2306, down from US$1.2347 late Tuesday.
Meanwhile, the US Commerce Department said housing starts dropped a bigger-than-expected 10% the month after the government ended its homebuyer tax-credit program. This came as quite a shock given market consensus was for a drop of no more than 5.2%. In addition, building permits decreased 5.9% while economists had expected a 3.3% rise.
So what to make out of all this? Investors decided to start taking profits, but no more than to push prices for equities, crude oil, copper and the likes to similar levels as at the end of the previous session. Overall trading volumes in US equities remained below average in a continuation of the trend since equity indices reversed trend and started posting some gains last week.
SPI futures are indicating a pretty much unchanged opening of the share market in Australia today.
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