Daily Market Reports | Mar 05 2012
By Greg Peel
We recall that a rumour hit the wires late on Thursday afternoon on Wall Street that a pipeline had exploded in Saudi Arabia, sending oil prices surging, but right on the closing bell that rumour was officially denied. Oil prices thus fell again in electronic trade so looking at the 24-hour price snapshot, Brent was down US$4.05 to US$123.63/bbl on Friday and West Texas was down US$2.14 to US$106.70/bbl. Net out the two sessions to expunge the rumour, and oil is otherwise little changed.
US energy stocks had nevertheless run up to the close on Thursday to follow the oil price so in Friday's session they were forced to retreat, putting pressure on the indices. Energy stocks were also not helped by a call from President Obama to end US$4bn in annual oil and gasoline subsidies. The Dow did attempt another run at 13,000 late in proceedings but yet again failed, and on thin volume the average finished down two points for the day. The S&P lost 0.3% to 1369 and the Nasdaq lost 0.4% to 2976, with the 3000 mark again visible but as yet unattainable.
The US dollar was strong again on Friday, marking a week of strength as the relief of the Greek bail-out and the LTRO gave way to cold hard reality once more. On Friday it was Spain's turn to rock the boat with as the government increased its expected 2012 budget deficit to GDP ratio to 5.8% from an earlier hoped for 4.4%.
There remains much talk about that the European crisis is far from over. Spanish and Italian bond yields are still behaving themselves with help from the LTRO but the focus has now shifted to Portugal, where economists have begun to assume a second troika bail-out package and a bondholder haircut will be needed, while Greece refuses to go away, with suggestions around that the second bail-out package and haircut it just secured will still not be enough.
On the subject of the Greek haircut, on Thursday bondholders will vote to accept or otherwise the 53.5% cut and rollover into longer-dated bonds and if a two-thirds majority acceptance is not forthcoming, the Greek government is expected to pass legislation to force full participation. If this occurs a “credit event” will be officially triggered and credit default swap holders will be able to make a claim. As to what the impact of this occurring would be, economists are not overly concerned, with suggestions that clearing out the CDSs is probably a good thing. But how nervous will global markets be in general?
The euro was also not helped by a weak January retail sales result out of Germany on Friday night and ultimately the US dollar index rose 0.7% to 79.41. Gold thus slipped back US$12.60 to US$1711.80/oz and the Aussie has fallen 0.6% to US$1.0730.
Base metals had closed on Thursday night before the oil shenanigans began so Friday night's moves were minimal, although aluminium fell 1.5%.
The SPI Overnight fell 16 points or 0.4%.
On Saturday Beijing announced a sudden steep fall in China's non-manufacturing (services and construction) activity in February as the PMI fell to 48.4 from 52.9 in January. It is the first drop in this PMI in three months. However, local economists were quick to point out that February numbers are often distorted by the impact of the Chinese New Year festival which this year fell fully in January and left a bit of a vacuum of suddenly quieter activity in February. Today HSBC will release its independently calculated measure.
Australia will also see its services PMI out today and construction on Wednesday. Today also brings the monthly ANZ job ads series and TD Securities inflation gauge. Counting down to the December quarter GDP result on Wednesday we'll see quarterly company profits and inventories today and the current account, including terms of trade, tomorrow.
The RBA will make a rate decision tomorrow and is expected to remain on hold once more with the Greek bail-out having been settled since the previous meeting. ABARES will provide a commodity report for the March quarter. Following Wednesday's GDP we'll see February unemployment on Thursday and the January trade balance on Friday.
The eurozone, UK and US will also all report services PMIs tonight. It's a quiet week economically for the US although it is employment week, with the ADP private sector report out on Wednesday and the official non-farm payrolls number on Friday. The US unemployment rate is expected to remain steady at 8.3%. Factory orders tonight, consumer credit on Wednesday and the trade balance on Friday make up the numbers.
The RBNZ, ECB and Bank of England (and Bank of Canada for that matter) will all make rate decisions on Thursday and in the case of the ECB and BoE, no change is expected. Both have recently shifted the printing presses up a gear, with the BoE buying UK bonds and the ECB handing out cheap loans to banks.
Friday will see a monthly data dump from China, which includes February retail sales, industrial production and inflation data.
On the local stock front, there are no results at all this week (yay!) but there is a lot of ex-dividend activity, particularly today. Such periods act as a drag on the index. Insurance Australia Group ((IAG)) will provide a market briefing on Friday.
Rudi will appear on Sky Business at noon on Thursday and later on that day, between 7-8pm, on Switzer.
For further global economic release dates and local company events please refer to the FNArena Calendar.
