Daily Market Reports | Apr 05 2011
By Greg Peel
The Dow closed up 23 points or 0.2% while the S&P was steady at 1332 and the Nasdaq was also steady.
Volume on Wall Street was very light last night but it is noteworthy the Dow's close at 12,400 means the first close above the February high of 12,391. The S&P 500 is meeting technical resistance at 1333, being the 100% move up from the March 2009 bottom, and is still short of its February high at 1343.
Aside from a general lack of conviction at present as we head towards the first quarter earnings season beginning next week, Fed chairman Ben Bernanke's scheduled speech is an evening event and hence still pending as I write. Given the actual topic of the speech is exchange consolidation, it is possible monetary policy won't even be touched on.
That hasn't stopped Bernanke's colleagues from continuing to play out a monetary debate in the public forum. Charles Evans from Chicago last night suggested the Fed would complete its US$600bn QE2 program as scheduled and that low inflation meant accommodative monetary policy was still viable. Dennis Lockhart of Atalanta suggested the US economy is rebalancing away from reliance on the US consumer and that expansionary policy was facilitating that rebalancing.
The more the various Fed presidents open their mouths, the more apparent it becomes the FOMC is pretty much split down middle. In the meantime, one fund manager interviewed on CNBC this morning was asked if he thought there would be a QE3, to which he responded, “there'll be a QE3, 4 and 5.”
Across the Atlantic it is nevertheless a different story. Currency markets fell quiet last night ahead of several central bank meetings this week. The RBA meets today, and will leave rates on hold (the Aussie was down for once last night to US$1.0366). The BoJ meets on Thursday and will likely update the story on post-quake stimulus while the ECB and BoE meet on Thursday night. The ECB will raise, and may flag more raises to come, and the BoE will possibly raise as well. The US dollar will come under pressure, albeit markets are already anticipating such moves.
When we move south to MENA, the situation is not getting any calmer. Gaddafi has again rejected a ceasefire offer and that battle draws on. There were fresh clashes in Yemen last night, while the Bahraini government has shut down the Opposition newspaper. Demonstrations and strikes are continuing in Algeria, and in Nigeria (not actually MENA) the election has been postponed for a week. Nigeria is a significant global oil supplier and markets have been expecting the usual unrest which accompanies Nigerian elections.
Nigerian oil is a close substitute for Brent, and last night Brent crude rose US$2.36 to US$121.06/bbl. West Texas crude only rose US53c to US$108.24/bbl, but we recall that record inventories at Cushing Oklahoma are undermining the gross value of crude delivered at that point. Prices to Australian consumers (and producers on a comparative basis) are aligned to Brent. It is notable that yesterday Deutsche Bank again lifted its oil price forecasts and as a result lifted target prices for all Australian oil and gas companies.
Outside of oil it was a quiet session for commodities, with base metals mixed and gold up US$5.60 to US$1434.50/oz.
The SPI Overnight was up 9 points or 0.2%.
Beyond Bernanke's speech, currency markets will also be interested in today's release of Australia's February trade balance, and tonight sees the various service sector PMIs released across the globe.
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