The Monday Report

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By Greg Peel

The snow was already falling heavily in New York on Friday, encouraging some traders to stay home. As the blizzard intensified and transport began to shut down, those who turned up began agitating for an early NYSE close – something which hasn’t happened (for snow) since the eighties. The NYSE stayed open, but volumes were low.

It was another positive session nevertheless. The Dow rose 48 points or 0.4% to be eight points shy of 14k, while the S&P gained 0.6% to 1517 and another new five-year high. A 0.9% rise in the Nasdaq took that index to a new twelve-year high, albeit the tech-heavy index is still well below its dotcom bubble all-time high.

Wall Street responded well to trade data from across the globe. China’s exports rose 25% in January (year on year) after rising only 14% in December and compared to expectations of 17.5%. Imports rose 29%. Germany’s 2012 trade surplus was its highest in 60 years. No wonder the Germans are hellbent on holding the single currency bloc together. And the US trade deficit shrank in December to its lowest level in three years.

China’s CPI inflation level fell to 2.0% in January from 2.5% in December, easing fears of any tightening requirement. The CPI is expected to bounce in February to reflect New Year excesses but typically this is an aberration.

We are now into the long tail of the US earnings season and the score card suggests a 5.2% increase in net S&P 500 earnings, year on year, when the forecast going into the season was 1.9%. Wall Street is continuing to see reasons to be cheerful, yet the psychological Dow 14k continues to provide staunch resistance as expected. Near-term top, or break-out level? After 14,000 the next barrier is the 14,165 all-time high.

The US dollar index was steady at 80.23 on Friday but the solid global data were enough to encourage firmer base metal prices. Most of the metals rose around 1%. Gold slipped US$3.30 to US$1668.40/oz while the Aussie managed to bounce 0.3% to US$1.0317 as last week’s weaker domestic data gave way to the China factor. Spot iron ore remains steady at US$155.10/t.

The euro was weaker on the session following the long-delayed EU budget decision, which saw cuts and further austerity. Such a decision was largely anticipated but it underscores the difficulty the EU faces in growing its economy.

The spread between the popular benchmark West Texas crude price and the practical benchmark Brent crude price is widening yet again. The positive global data (and simmering MENA tensions) sent Brent up another US$1.59 to US$118.89/bbl on Friday while the ongoing glut of supply at Cushing sent WTI just a little lower to US$95.72/bbl. The focus on WTI continues to mask the fact the now more positive view on the global economy is being threatened by rising energy costs.

The SPI Overnight fell 9 points after another solid day-session on Bridge Street on Friday.

The local reporting season will shift into second gear this week with a number of big name results. The highlight today will be JB Hi-Fi ((JBH)) while Wednesday brings Ansell ((ANN)), Boral ((BLD)), CommBank ((CBA)), Leighton Holdings ((LEI)), OZ Minerals ((OZL)) and WorleyParsons ((WOR)). Thursday sees Billabong ((BBG)), Downer EDI ((DOW)), Paladin Energy ((PDN)), Rio Tinto ((RIO)) and Wesfarmers ((WES)), while David Jones ((DJS)) will report quarterly sales. ANZ Bank ((ANZ)) will provide an update on Friday. These are merely a few of the result releases for the week.

Economically, today brings the monthly housing finance and investment lending data while tomorrow sees the NAB business confidence survey for January. Westpac releases its February consumer confidence survey on Wednesday.

China is closed all week. Japan will provide an estimate of its December quarter GDP on Thursday as the Bank of Japan holds another monetary policy meeting. Japanese officials have noted their “surprise” at the rapid de-rating of the yen since the last meeting. The eurozone will also release an estimate of December quarter GDP on Thursday.

The important releases in the US this week – if anyone can get into work – will be retail sales and business inventories on Thursday and industrial production and the Empire State manufacturing index on Friday."

FNArena Editor Rudi Filapek-Vandyck will make appearances on Sky Business today (Monday) at around 11.15am to talk broker upgrades and downgrades, again on Thursday noon (Lunch Money) and on Switzer TV later on that day after 7pm, plus on Friday he'll join the panel on the newly launched Bonds versus Equities, starting at 7pm.

 

For further global economic release dates and local company events please refer to the FNArena Calendar.

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