The Monday Report

This story features QBE INSURANCE GROUP LIMITED. For more info SHARE ANALYSIS: QBE

By Greg Peel

It would appear Colonel Gaddafi's 42-year reign of terror is heading towards its final curtain as the Opposition takes control of all bar Tripoli and petitions the world for official recognition and support. On Friday night markets began to assume Gaddafi would fall shortly and Libya would move to the same relatively peaceful state of limbo Egypt now finds itself in.

On that basis, Wall Street shook off a week of nervous selling and reverted back to buying mode. While the Dow was up 61 points or 0.5%, the S&P gained a more substantial 1.1% to 1319 and the Nasdaq jumped 1.6%. Wall Street nevertheless marked its biggest weekly fall since last August.

While the news from Libya seemed positive, we recall that last Thursday night markets were reacting to a rumour that Gaddafi had been shot. Precious metal and oil prices plunged on that news. So while Gaddafi might be on his last legs, he is indeed still with us hence precious metals recovered those drops on Friday night, sending gold up US$12.10 to US$1409.60/oz and silver up 4.4% to US$33.38/oz. Oil nevertheless steadied, with Brent closing up only US78c to US$112.14/bbl despite insistence from Saudi Arabia that there was enough excess around to cover lost Libyan production.

Base metals in London mostly went the way of stocks, with bellwether copper jumping 3%. And the easing of nervousness allowed the US dollar index to tick up slightly to 77.21. The Aussie risk indicator was nevertheless popular again despite the dollar's rise, climbing over a cent to US$1.0174.

Helping Wall Street along on Friday was the release of the fortnightly Michigan Uni consumer sentiment measure, which rose to 77.5 from a previous 75.1 and marked its highest level in three years. But on the flipside, I've been proven wrong on the US GDP in assuming that the accelerating recovery in the fourth quarter would translate into revision upgrades. Having marked 3.2% on the first estimate, the first revision of GDP came in at 2.8% when economists had expected 3.3%. The difference, it seems, was in an overblown consumer spending component.

Not that it mattered while the macro considerations of geopolitics held sway. Notably, the VIX volatility index in the US dropped 10% to 19 on Friday. The SPI Overnight gained 20 points or 0.4%.

Moving to this week, today is the last day of the month and the final day of the results season in Australia. Highlights include QBE Insurance ((QBE)) and QR National ((QRN)). The focus this week in particular and throughout March turns to a solid round of stocks going ex-dividend, which will appear to drag on index performance as cash is transferred into investors' pockets.

On the economic front in Australia it's GDP week, with the fourth quarter result due on Wednesday. Expectations are for a quarterly gain of 0.7% to leave the annual rate of growth unchanged at 2.7%. Ahead of the result, fourth quarter corporate profits and inventories (today), along with net exports and the current account (tomorrow), will provide economists with late clues.

The RBA will hold its monthly policy meeting on Tuesday and will leave the cash rate unchanged. Monthly data releases during the week include private sector credit today along with the RP Data-Rismark house price index and the TD Securities inflation gauge. On Tuesday it's retail sales and the manufacturing PMI, Wednesday new home sales, and Thursday building approvals, the services PMI and the trade balance.

It's purchasing managers' index week this week kicking off tomorrow with manufacturing PMIs in Australia, China, the UK, EU and US. Service and construction PMIs then follow.

The economic week in the US kicks off tonight with the Chicago PMI, pending home sales and private expenditure. Tuesday sees construction spending, vehicle sales the manufacturing PMI and Wednesday the Fed Beige Book and the ADP private sector unemployment measure. Thursday it's chain stores and the services PMI and the big one is on Friday with non-farm payrolls.

Attention will turn to the eurozone on Thursday when the ECB holds a policy meeting. There have been hints the central bank might raise its cash rate from 1.0% for the first time since the GFC lowered it. 

Rudi will appear on Sky Business as usual at midday on Thursday.

For further global economic release dates and local company events please refer to the FNArena Calendar.

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