Daily Market Reports | Nov 26 2012
By Greg Peel
“The best Black Friday ever,” said Wal-Mart. Whether or not this represented a bit of poetic licence, or spin, so early in the proceedings is yet to be seen when the numbers are finally announced. Wal-Mart also caused quite a brouhaha this year by deciding to open on Thanksgiving Thursday evening rather than waiting for Black Friday morning – a move highly criticised by workers and unions on a day up till now considered sacrosanct. But Wal-Mart made its call on Friday morning during the half-day session on the NYSE, and Wall Street responded.
Retailers in general were upbeat over their early Black Friday sales, once again suggesting Main Street America is unconcerned about any fiscal cliff. Wall Street was also catching up with Thursday's news of a return to expansion for China's manufacturing sector as estimated by HSBC, while business confidence surveys in Germany (IFO) and France provided surprising gains when falls were expected.
It was enough to push the Dow back towards 13,000 and the S&P back towards 1400 (which we haven't seen since the election) at which point technical considerations would have come into play. The Dow closed up 172 points, or 1.4% to 13,009, while the S&P gained 1.3% to 1409 and the Nasdaq added 1.4%. Trading floors, trading rooms and broking houses would have been manned only by a few skeletons, and volume was holiday-thin.
We'll no doubt have a better handle on the true Black Friday numbers come Monday, which also happens to be “Cyber Monday”. Traditionally this is the online equivalent of bricks & mortar's Black Friday as online sites roll out the Christmas specials, although with online quietly usurping B&M, one wonders whether this tradition remains relevant.
EU leaders met over the weekend to discuss the union-wide budget for next year. Blow me down if there wasn't disagreement. The Haves, who fund the budget, pushed for more spending cuts, while the Have-Nots, who leech off the budget, asked for a budget increase. UK prime minister David Cameron was once again wearing his “I'd pull Britain out of the EU tomorrow if I could” hat and led the budget cut charge, backed by the likes of Germany, Sweden and other net losers in the budget contribution game. France was somewhat stuck in the middle, given France is a net contributor, but President Hollande is pro-growth.
The bottom line is it was all too hard, and in that wonderful European tradition we've come to know and admire, it was decided that rather than push on the meeting further into the weekend in an attempt to grind out an agreement, it would be best to just to give up and try again next year. Someone clearly had a tee-off time approaching.
The eurozone is a subset of the EU, and tonight zone finance ministers will hold meeting #257 on what to do about Greece. The IMF has indicated it might be prepared to bend on bond extensions, and eventually Greece will run out of money, which does rather provide a decision deadline. If Greece can be sorted, then Greek Cyprus can be sorted simultaneously with a bail-out. Cyprus' financial system is in disarray given everyone holds loads of Greek bonds. However, there remains one stumbling block.
Angela Merkel wants to take three considerations to one sitting of the German parliament, rather than to three separate sittings. Greece is one, Cyprus two, and three is Spain and its bail-out. Complicating the issue, however, is Sunday's election in Catalonia. The votes are still being counted, but exit polls suggest the pro-independence parties have a strong upper hand. The Catalans are to Spain what Germany is to the eurozone – the region with all the money that ends up paying out to the other regions and copping nationwide austerity measures for its trouble. If Catalonia is to secede then Prime Minister Rajoy's mandate is in disarray. A request for a bail-out will come with the knowledge further strict austerity conditions will be required by the troika, and Spain is now at risk of losing its most economically valuable state. It won't happen tomorrow – if the pro-independence ticket wins it will then call a referendum, so the whole thing could take months – so once again Europe finds another way to land itself in limbo.
It is still unclear whether Greece will get the green light on its bail-out tranche tonight (tomorrow morning Sydney time).
It was thin trading for US stocks on Friday, and thin trading for the US dollar. The dollar index fell 0.6% to 80.23 as stocks surged, sparking a general “risk on” session in markets across the globe which were also thin without the usual US participation. Gold jumped US$22.20 to US$1751.90/oz and the Aussie is up 0.7% to US$1.0459. Base metals all rose 1-2%. Spot iron ore is up US20c to US$118.90/t.
Oil was less excitable, playing it safe while the Gaza situation continues to simmer. Brent was up US20c to US$118.90/bbl and West Texas was up US90c to US$88.28/bbl.
It was once again left to the US bond market to play the more reserved role. The ten-year yield is little changed at 1.69%.
The SPI Overnight rose 30 points or 0.7%.
We move on to this week, and I've already highlighted the possibilities in Europe. The US needs to play catch-up after its holiday break and hence there is a wealth of data out this week.
We begin tonight with the Chicago Fed national activity index. Tuesday brings the Case-Shiller and FHFA house price indices along with consumer confidence, durable goods and the Richmond Fed manufacturing index. Wednesday it's new home sales and the release of the Fed Beige Book, then on Thursday we'll see chain store sales (including Black Friday numbers), pending home sales and the first revision of the September quarter GDP estimate. A buoyant market is looking for an increase to 2.8% from an initial 2.0% reading. Friday wraps up the week with personal income and spending and the Chicago PMI.
For Australia, Wednesday brings September quarter construction work done and Thursday September quarter private sector capital expenditure, which are important constituents of our own GDP due next week. Thursday also sees monthly new home sales and Friday brings private sector credit.
There are another thousand or so AGMs on the local calendar this week, but thankfully November all but sees them out. There are a mere handful of meetings due in December.
Rudi will appear on Sky Business at noon on Thursday and again at 7pm for the Switzer Report.
For further global economic release dates and local company events please refer to the FNArena Calendar.
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