Daily Market Reports | Mar 21 2011
By Greg Peel
On Friday night, two pieces of news came through to Wall Street. One was that Colonel Gaddafi had declared a ceasefire and the other was that power had been restored to two of the six Fukushima reactors. The Dow jumped 150 points on the open but then spent the rest of the day quietly drifting off. As I suggested last week, with the situation still fluid it was not a time to take big speculative positions home over the weekend.
The Dow closed up 83 points or 0.7% and the S&P gained 0.4% to 1279. Brent crude fell almost a dollar to US$113.93/bbl and base metals were mixed.
The yen fell strongly against the US dollar on Friday night following an announcement that the G7 central banks will coordinate to intervene in markets and keep the Japanese currency from rising further. The G7 suggested that in the wake of the Japanese tragedy, volatility in exchange rates only exacerbates the disruption to the Japanese and global economies.
The Aussie dollar fell sharply last week as Japanese investments were repatriated, but on Friday it bounced 1.6% to US$0.9965. European currencies remained popular nevertheless, with the euro continuing to push higher since last week's announcement of a comprehensive eurozone rescue package. This meant the US dollar index fell 0.5% to 75.57. With no further commodity fund selling at this stage, gold rose US$13.50 to US$1418.60/oz and silver jumped 2.7%.
With a weaker follow-through from Wall Street than might have been expected after Australia's steep gains in Friday's session, the SPI Overnight fell 18 points or 0.4%.
That was Friday. Over the weekend the news from Japan was little changed. Water continues to be poured onto the stricken reactors and the suggestion is radiation levels have fallen slightly. Work continues to restore power to all reactors in the hope cooling pumps can be restarted. In the meantime, the lack of progress is beginning to take its toll on the Japanese and there are reports some food available in Tokyo may be contaminated. The exodus has begun, as ex-pats and locals cram airports to escape a situation in which they can no longer feel confident.
So there's nothing particularly new on the Japanese front as we enter this week. In Libya, however, the situation changes from hour to hour. Gaddafi's ceasefire proved to be the furphy most expected it would be and thus UN coalition troops began their missile strikes. Gaddafi has holed himself up in his bunker in Tripoli and thousands of loyalists have become his human shield. From his bunker he first railed against the Western coalition in one of his typically lengthy, rambling rants, and then later declared another ceasefire and made another offer of reconciliation with opposition forces, none of which anyone believes for a moment.
In the meantime, protesters have been killed in Yemen following similar fatalities in Bahrain last week. Protests have also now erupted in the West's mortal enemy Syria. Where does UN intervention end? The US is caught between a rock and a hard place, not wishing to engage in yet another war it can't afford but feeling the pressure of the world to stop Gaddafi. But what happens if the US finds itself squared off against Saudi Arabia, which is supporting the Bahrain royal family? Can the UN intervene in Libya and simply allow leave other states to their own devices?
This is the developing situation in MENA as we enter the new week – a week which brings a wave of latest US economic data. Wall Street would dearly love to be able to simply focus on its own economy rather than worry about disruptive world events.
Tonight in the US sees the Chicago Fed national activity index and existing home sales. Tuesday it's the FHFA house price index and the Richmond Fed manufacturing index. Wednesday it's new home sales, Thursday durable goods, and Friday brings the final revision of fourth quarter GDP along with the fortnightly consumer sentiment survey. For the GDP, economists are expecting an upward revision to 3.0% from 2.8% growth.
By contrast, it's a very quiet week on the economic front in Australia. Thursday will bring the Conference Board leading economic index. Thursday also sees the release of New Zealand's pre-quake fourth quarter GDP.
Thursday also brings HSBC's “flash” estimate of the Chinese manufacturing PMI for March, which is a recent addition to HSBC's Chinese economic monitoring.
Markets are closed in Japan today for a public holiday. It's the vernal equinox – a day which should be ushering in the joys of a new spring.
Rudi will be appearing on Lunch Money on Sky Business at noon on Thursday.
For further global economic release dates and local company events please refer to the FNArena Calendar.
