The Overnight Report: Wall Street Sails Merrily On

This story features MYER HOLDINGS LIMITED. For more info SHARE ANALYSIS: MYR

By Greg Peel

The Dow rose 69 points or 0.6% while the S&P gained 0.6% to 1319 and the Nasdaq was up 0.5%.

Australia's economic bifurcation was on display again yesterday in a round of data releases. While the ANZ job ads series sails merrily onwards ever upwards, up 2.5% in January to further imply falling unemployment, specific industries are not looking quite so flash.

The construction PMI for January was down sharply from 43.8 in December to a dismal 40.2 to indicate an industry in sharp contraction. That's eight months of below 50 numbers, and each of manufacturing, services and construction are now wallowing in the forties. There have been far healthier numbers posted by China, the UK, eurozone and US.

And December retail sales were up only 0.2% compared to 0.5% expectation. Myer ((MYR)) fell 12% after a profit warning based on a 3.5% fall in Christmas sales year-on-year. Myer CEO Bernie Brookes called it the worst trading period he had ever experienced. FNArena wrote extensively on the retail sector in mid to late 2010 and the suggestion remains intact. Australian consumers are not bouncing back to pre-GFC spending patterns, and may not for a generation.

Just of well we've got lots of stuff in the ground!

By contrast, US consumer credit rose over US$6bn in December compared to expectations of US$2.4bn. The total out on credit cards of US$2.41 trillion compares to the record of US$2.58 trillion posted in July 2008. Great for the US economy today, but tomorrow?

Money continues to flow out of the safety of bonds in the US and into stocks, commodities and other risk trades. But not emerging markets. The Fed is pumping money into the system and Wall Street is surging. The PBoC is taking money out of the system and the Shanghai index has been steadily falling over the last few months. Bonds and commodities took a breather last night as attention focused on more consolidation in the corporate sector.

Corporate executives seem to like to do their most important deals on the weekend when the phone's not ringing. Hence we often have a Merger Monday, when several deals are announced at once. That was the case last night on Wall Street as sizeable deals were announced in the media, medical, energy and financial sectors. There was little else going on in the world and Egypt is still in limbo, so currencies were all flat last night. The dollar index is sitting at 78.05 and the Aussie at US$1.0138.

Gold hardly moved at US$1349.80/oz and base metals took a breather in London. Oil remains volatile nevertheless, largely fluctuating at present on Egyptian developments or lack thereof. Crude fell US$1.55 to US$87.48/bbl last night as relevant players in Egypt began talks.

Notably the VIX volatility index on the S&P 500 is back at 16 after having pushed a bit higher on Egyptian tensions. Wall Street is just quietly ticking along in up-mode these past few days and becoming a lot more parochial as solid economic readings and corporate results bring confidence. Who needs China?

Well Australia obviously does because the ex-resources economy is gasping.

The SPI Overnight was up 19 points or 0.4%. 

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