Daily Market Reports | Jun 03 2011
By Greg Peel
The Dow closed down 41 points or 0.3% while the S&P lost only 0.1% to 1312 and the Nasdaq was actually up 0.2%.
It was a jittery Wall Street which opened last night unsure whether to buy or sell as the S&P 500 tested a technical support level at 1311. News that last week's new jobless claims had fallen by 6,000 to 422,000 provided at least some comfort ahead of tonight's unemployment report for May, but economists had pencilled in 415,000 claims.
So by 11am after some posturing, the decision was made to sell. The Dow fell 100 points in rather a hurry.
Just when it looked like we might be in for another rout, someone decided to give ECB president Jean-Claude Trichet a prize. It wasn't for central banking excellence – let's not get silly – it was the Charlemagne Prize for fostering European unity. And in receiving the prize, Trichet made a speech in which he suggested that eurozone authorities should have more power to override the economic policies of member nations as a “second stage” of a rescue if the “first stage” of letting them sort themselves out is not working.
At the same time a news report suggested the aforementioned authorities had come to a tentative agreement to extend Greece's emergency loan arrangements for another three years. The euro thus began to rally, and given Wall Street is all but tethered to the euro at present stocks began to bounce as well – all the way back to square by 2pm. By session end the US dollar index had fallen 0.8% to 74.31.
Gold followed down the dollar index, closing US$5.30 lower at US$1533.80/oz, which seems the wrong way around unless one considers eurozone default risk was lessened by the news from across the pond.
And speaking of default risk, ratings agency Moody's, still reeling from the carrot jibe, last night told the US political parties if they didn't stop squabbling in the back seat there'd be no ice cream after dinner tonight. Or it told them if they couldn't settle their argument over raising the US debt ceiling quickly the agency would be forced to put the US on negative credit watch. Oooooooh…
The bond market responded by sending the ten-year yield back up 8 basis points to 3.03% after yesterday's big buying spree, which is the typical response to a country's sovereign debt if a negative watch is threatened. Except that really US bonds were sold on the easing of fears over Greece. If anyone was really worried about the US losing its AAA rating, I don't think its ten-year would be near historical lows at 3%.
Oil spent all session wondering which way to jump, but decided the late US dollar drop was enough reason to send Brent up US$1.01 to US$115.54/bbl and West Texas up US58c to US$100.87/bbl. Base metals were all but closed in London before the dollar drop so they finished 0.5-2.5% lower. We recall that the LME was closed on Wednesday night before Moody's downgraded Greece, so again the metal market is pretty much running a session behind.
Wall Street then drifted away at session end on a mixed finish, with anticipation heightened for tonight's jobs report. Economist forecasts are now all over the shop following the shock ADP report on Wednesday night, but if four things are certain in life they are death, taxes, the fact that the ADP report has never been a particularly accurate indicator of non-farm payrolls and the fact no one actually remembers the time economist job forecasts were right.
So we'll hold our breath until tonight.
The Aussie is up 0.5% to US$1.0673 and the SPI Overnight fell 2 points.
As a side bar today and tonight we also have service sector PMIs from across the globe.
I'll be on Business View on Sky Business today at 2pm.
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