Daily Market Reports | Mar 01 2011
By Greg Peel
The Dow rose 95 points or 0.8% while the S&P gained 0.6% to 1327 and the Nasdaq was steady.
There was a lot going on in the Monday session to give stocks a further kick along. Firstly it was month-end, when often fund managers push up prices to make their returns more appealing. Given blue chips are in favour at present we can see a bit of influence here in the Dow's outperformance.
Then there was more Merger Monday activity, along with Warren Buffet's annual newsletter in which he claimed his enthusiastic bullishness.
Add in the continuing assumption that Gaddafi will fall, along with OPEC guarantees of no net oil production lost, and oil price weakness was also a boost. Then was the release of personal income and expenditure data for January which showed a huge 1.0% rise in incomes.
Unfortunately the income increase reflected a one-off decrease in payroll tax, and realistically the number was 0.3%. Consumer spending grew only 0.2%, thus more income was saved than spent – good for debt reduction long term, bad for the economic recovery and job creation in the short term.
The Chicago PMI, nevertheless, which measures the pace of growth of manufacturing in the busy Chicago Fed district, rose to 71.2 in February from 68.8 to mark its second highest level on record and confounded economists who were expecting a slight drop. On the other hand, pending home sales dropped 2.8% in January albeit this time economists had expected a greater fall.
In Middle Eastern news, protests have now spread to the Sultanate of Oman and fatalities among protesters have occurred. Like Libya, Oman is an oil producer of note albeit strangely non-OPEC. Oman is on the Arabian peninsular, so the king pin Saudi Arabia continues to be surrounded by unrest.
As this Report has noted recently, West Texas Intermediate crude has lost its significance given storage costs at Cushing, but of course the Americans are not going to abandon their longstanding local marker even if they admit Brent crude is now more relevant. So Wall Street will still respond to the “oil price” as WTI. Last night WTI fell US81c to US$97.07/bbl while Brent fell US38c to US$111.76/bbl.
The US dollar appears now to have reinstated its long expected downtrend. High oil prices clearly impact more on the US economy than any other, QE2 floods the market with supply, the BoE and ECB are both expected to raise rates soon – certainly well before the Fed does – and the safe haven of choice has now become the Swissy. Last night the dollar index fell 0.4% to 76.91.
The Aussie ticked up only slightly to US$1.0183, and US$1.02 has proven a tough barrier so far. But unfortunately as the US dollar weakens and the Aussie rises, it's a negative for Australia's export-dependent economy. When we will start trading directly with our partners without first converting to greenbacks?
Gold was little changed last night at US$1411.50/oz but silver has regained momentum, rising 1.5% to US$33.88/oz. Base metals were strong in London as bargain hunters responded to what they believed were oversold conditions last week. Copper rose 1% and nickel was up 3%.
The SPI Overnight was up 20 points or 0.4%.
The local reporting season is now over, and so attention turns back towards economic data ahead of tomorrow's GDP release. Today is manufacturing PMI day across the globe, local retail sales for January will be interesting, as will fourth quarter net exports with regard to that GDP.
The RBA will meet today and leaves rates unchanged, but the accompanying statement is always worth a read.
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