Daily Market Reports | Sep 03 2010
By Greg Peel
The Dow closed up 50 points or 0.5% but the S&P gained 0.9% and the Nasdaq 1.1%.
As I anticipated yesterday, the July trade balance result in Australia showed that while the June quarter may have been strong, as indicated by the GDP, the September quarter is another story. Aside from military aircraft purchases which impacted the import side of the ledger, exports of bulk materials were down compared to the previous quarter and the trade balance pulled well back from June's record surplus.
It showed that Australia should not get too caught up in an onward-ever-upward mindset but should be satisfied with a moderate level of economic growth. It also gave reason for the RBA not to move on interest rates any time soon, and showed up just what a laughable load of rubbish it is when politicians argue over whose three-year budget forecast is right or wrong. They have no better chance of nailing the 2013 accounts in 2010 as they do of picking all three Cup winners in the interim.
But while the trade balance result might have pulled some heads out of the clouds yesterday and crimped the ASX 200 surge, it's the opposite story across the Pacific. Once again Wall Street was treated to some positive data releases and traders decided to buy late in the session in a bold move ahead of tonight's jobs report. The Dow was flat at 2pm as caution seemed the better part of valour despite some encouraging data, but the buyers rolled as the session began to wind up.
It was a solid gain following the 250 points on Wednesday, with Wall Street no doubt hoping the jobs report might bring more positive surprise and that come next week, after the Labor Day long weekend which signals the end of the summer holidays, the previously absent sun-tanned brigade will jump on the positive momentum bandwagon.
Either that, or they'll see a great selling opportunity. But let's not be a killjoy.
Last week's new jobless claims data showed a drop of 6000 to a running average of 472,000 when economists had expected 475,000. That's the second week of falling claims, but the week before the running average still increased. This week it fell, providing more heart ahead of tonight's numbers.
Economists had expected pending home sales to fall 1.0% in July but instead they rose 5.4%, providing the first bit of positive news on the housing front in months. A jump in pending sales allows economists to upgrade their forecasts for actual sales in August and September. Actual sales in July were no short of shockingly woeful.
But it wasn't all beer and skittles. Economists were looking for a 0.2% increase in factory orders in July after a 0.6% fall in June but the result managed only 0.1%. Hardly devastating, but in the breakdown of a lot of the major data releases of late, including the manufacturing PMI and the GDP revision, specific numbers for orders and ordering intentions have been disturbingly low providing fodder for the double-dip camp. As is the case with pending home sales, orders data are a leading indicator of subsequent economic growth.
On the subject of economic growth, poor old Main Street USA just can't take a trick at the moment. Hurricane Earl is sweeping its way up the Atlantic Coast which, by Friday evening, should be packed with beach-going holiday-makers. Instead, coastal holiday retreats are being evacuated. This will likely mean financial devastation for those towns so reliant on the tourist dollar.
And down in the other seat of hurricane fear – the Gulf – another fire on another oil rig off Louisiana immediately brought back disturbing memories of that which set in train history's greatest oil spill disaster. This time, however, no lives were lost and so far no major damage reported, but it's another set-back for the oil industry lobbying to lift the President's temporary ban on new offshore drilling.
Oil thus rallied US$1.11 to US$75.02/bbl despite only a slight drop in the dollar index to 82.41. The Aussie was steady at US$0.9109.
Base metals maintained their positive bias in London on the mixed US data with aluminium and nickel the stand-outs, posting 2% gains.
Gold is nevertheless acting largely with a mind of its own, quietly building momentum and pushing up close to the previous all-time nominal high. Gold added US$6.90 last night to US$1251.30/oz.
The blow-off selling in US bonds also continued last night as the flipside of a rising stock market. The ten-year yield gained another 5 basis points to 2.63%.
The SPI Overnight continued its positive bias, rising 30 points or 0.7%.
Today and tonight sees services PMI releases across the globe, including Australia, as a curtain raiser for the main event ahead of the NYSE opening bell– US jobs.
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