Daily Market Reports | Mar 08 2012
By Greg Peel
The Dow rose 78 points or 0.6% while the S&P gained 0.7% to 1352 and the Nasdaq added 0.9%.
The Institute of International Finance is the industry body which negotiated the Greek haircut deal on behalf of its members, such as European banks. Last night it gave indications that it was confident the Greek bond restructure would pass tonight, given the number of its members who have indicated willingness.
This news provided some relief last night for global markets which on Tuesday night were concerned the deal would not go through and a default would be triggered for CDS purposes. Wall Street was also somewhat heartened by a story from the Wall Street Journal regarding the Fed.
We recall that last week Ben Bernanke suddenly left any mention of QE3 out of his testimony to Congress, having for months included allusions to further stimulus in his statements. This omission was not well received by Wall Street. But the WSJ article suggests the Fed is indeed considering QE3 but a “sterilised” form of quantitative easing, which means the Fed “lends” printed money by buying bonds but immediately “borrows” it back buy issuing shorter term bonds. The net result is not really a form of “additional” stimulus, more of a yield curve fiddle.
Which means its impact would not be anything like that of the first two QEs, yet still it would mean the Fed is working behind the scenes to support the US economy as best it sees fit. In the meantime, more pragmatic commentators are looking forward to the time sufficient improvement in economic data means the Fed has to start thinking about going the other way.
To that end, last night's ADP private sector jobs number was a good 'un at 216,000 new jobs added for February, providing hope for another solid +200k non-farm payrolls result on Friday.
All of the above allowed Wall Street to bounce back somewhat from Tuesday night's big drop. But every sliver lining has a cloud, and a combination of reduced fear and lower than expected US weekly inventories saw oil bounce back quite strongly as well. Brent was up US$2.30 to US$124.40/bbl and West Texas was up US$1.51 to US$106.21/bbl. The rising price of oil was yet another factor preventing Wall Street from pushing through new psychological barriers over the past couple of weeks, and contributing to Tuesday night's tumble.
Most markets reversed course last night after big moves on Tuesday. The euro ticked back somewhat allowing the US dollar index to tick down to 79.73. This was a decent enough excuse for a few gold bargain hunters to move in, and gold rose US$13.80 to US$1684.90/oz. Despite yesterday's weaker than expected Australian GDP result, the Aussie has recovered 0.4% to US$1.0584.
Base metals were mostly a bit stronger, with copper up 0.5% and nickel up 1%, but weakness continued in aluminium and tin.
The US ten-year bond yield recovered 3bps to 1.97% but this risk indicator has been stuck around the 2% mark now for some time, as global fears ease on the one hand but talk of more Fed bond buying persists on the other. The VIX fear indicator fell back 8% last night to 19. The VIX has also seen little movement of late, but with not much volume going through physical shares there is not as much demand for options either.
The SPI Overnight recovered 19 points or 0.5%.
The Australian unemployment number for February will be released today after which Rudi will appear on Sky Business at noon. Later on the day Rudi will appear on Switzer TV (7-8pm). Tonight sees the ECB make a rate decision and although no rate change is expected the world will still be interested in what Mr Draghi has to say.
All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available in the FNArena Cockpit. Click here.
All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.
