Daily Market Reports | Apr 03 2013
Greg Peel
The Dow closed up 89 points, or 0.6%, while the S&P gained 0.5% to 1570 and the Nasdaq added 0.5%.
North Korea is in a state of war with the West, but the West is none too fazed. The boy-king is waving around his missiles, prompting the US to shift a bit of military muscle to the region, but in Seoul they’ve heard it all before. There is no panic, and around the globe stock markets have shrugged off the posturing.
European stock markets opened last night for the first time after the Easter break. It was the first chance to respond to the lack of rioting in the streets of Nicosia on Thursday night, which calmed any further Cyprus fallout fears, and the major indices promptly jumped 2%. One might be forgiven for thinking that Europe, like the US, is on the economic mend. Yet nothing could be further from the truth.
As we turned the corner into 2013, it appeared that perhaps Europe was also turning a corner of its own. The UK purchasing managers’ indices had moved into expansion, and while still in contraction, the European numbers were quietly closing the gap on the 50 neutral mark. But alas, it was nothing more than a head fake.
The European numbers have fallen ever since, and last night the eurozone manufacturing PMI for March came in at 46.8, down from 47.9 in February. Germany scored a contractionary 49 and France a fairly sad 44. The UK number in February had shocked the Brits with a fall into contraction at 47.9 and economists were hoping for a bounce in March. At 48.3, the bounce disappointed.
Both the BoE and ECB hold policy meetings tomorrow night.
The US had also posted a disappointing PMI on Monday night, albeit still expansionary. Last night’s data were more comforting, with factory orders jumping 3% in February as expected and sales of locally made vehicles surging 5-6% last month. By contrast, US sales of Toyotas rose only 1% despite the collapsing yen. The currency effect is no doubt yet to play through.
The Dow was up more than 100 points in the morning before drifting in the afternoon. A final push took the average further into blue sky, while the S&P also managed to get across the line at 1570, or one point into its own blue sky. Positive data was cited as the major driver, along with some good news for health insurers with regard to a government policy back-down on Medicare payments. And add general bullishness.
The US dollar index edged up 0.2% to 82.93, but from here on the dollar may be set for an added boost after Thursday when the BoJ unleashes the printing presses, the BoE may speed up the presses, and the ECB might just cut its cash rate. Topping off eurozone ignominy was the February unemployment number released last night, which showed a record 12%.
The Aussie dollar is also 0.3% higher at US$1.0447 despite the RBA’s lack of rate cut being widely expected and despite another manufacturing PMI shocker at 44.4. This is down from 45.6 in February, which in turn was a big jump up from January, at that stage providing false hope that maybe, just maybe, Australia’s manufacturing slump was finding a bottom. The PMI has been in contraction for 21 months.
Gold’s a funny thing, isn’t it? There’s a threat of nuclear war on the Korean Peninsula and last night gold fell US$23.40 to US$1575.90/oz, on only a small rise in the US dollar index. The reality is that gold rallied back over 1600 when the Cyprus fallout threat seemed real last week, and has now corrected on the basis Cyprus did not blow up as expected.
The LME was closed on Monday night and China will have another holiday break on Thursday and Friday so in a short week for base metals action, traders sold down last night. The weekend’s disappointing Chinese PMI was an incentive. The metals fell 1-2%.
The oils drifted slightly lower, with Brent at US$110.69/bbl and West Texas at US$96.94/bbl. Spot iron ore fell US$1.00 to US$136.10/t.
The SPI Overnight rose 12 points, or 0.2%.
Australia’s trade balance for February is released today along with new home sales data, and the Chinese service sector PMIs are due. Tonight sees the US services PMI along with the private sector jobs number, ahead of Friday’s non-farm payrolls.
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