Daily Market Reports | Jun 14 2013
By Greg Peel
The Dow rose 180 points, or 1.2%, while the S&P gained 1.5% to 1636 and the Nasdaq added 1.3%.
Mad dogs and Englishmen. You’d have to be one or the other to go out in the midday sun of current global QE madness. Having taken a breather on Wednesday, yesterday Japan went back to the job of fearing Shinzo Abe is not doing enough to deliver his much touted package of stimulus and reform. The Nikkei fell 6% and is now down 22% from its high.
The Australian stock market is no longer falling on a falling Aussie-dollar, but on a falling dollar-yen, given local stocks followed the Nikkei down yesterday as the Aussie rose against the greenback. It looked like carnage just before midday until the unemployment numbers were released, which may have provided pause for thought followed by some value buying. The ASX 200 is now square for the year nevertheless, down 11% from the high.
Australia added 1100 jobs in May, which is hardly the stuff of economic boom, but economists were expecting something a lot worse. For starters, the ABS’ new measurement model has raised eyebrows and potentially increased volatility in the jobs numbers, hence economists were expecting a solid fall in jobs in May following April’s surprisingly strong result. Other than that, a litany of much publicised lay-offs across Australian industry is suggesting the unemployment numbers simply have to rise. But they haven’t.
CBA suggested yesterday that perhaps while the lay-offs are getting all the headlines, jobs are actually being created elsewhere as RBA rate cuts take effect. Full-time jobs fell 5300 and part-time jobs rose 6400 in May to provide the net 1100 gain, prompting CBA to suggest “job restructuring” might be a fair argument. The participation rate fell slightly, which is not a positive, but either way the unemployment rate fell to 5.5% from 5.6%.
One minute everyone was convinced the RBA would have to cut again in July and next minute no one’s quite sure again. RBA policy is nevertheless small fry compared to the twin towers of BoJ and Fed policy, which between them have largely been driving the Australian stock market correction. Not the policies themselves mind – uncertainty surrounding the policies.
And on that note, last night the Wall Street Journal published an article suggesting Ben Bernanke would take the opportunity of next week’s scheduled press conference to calm the waters and ensure Wall Street that tapering will not begin in the near term. Given most had resigned themselves to the assumption tapering would be starting in the December quarter, this was a return of the sugar pills. Adding to last night’s buoyancy on Wall Street were the May retail sales figures, which rose a better than expected 0.6% following a tepid 0.1% rise in April.
US stocks subsequently rose in a straight line all day, with the Dow reclaiming the 15,000 level in definitive fashion.
Having spent a long time trying to break 100 yen, then flying through that level, the dollar-yen is now back at 94. The US dollar index is down 0.3% to 80.70 and the Aussie, having seen an extra kick from the local jobs numbers, is up 1.7% over 24 hours to US$0.9645 as yet another round of short-covering had its impact. Gold fell slightly to US$1385.30/oz.
Last night the World Bank downgraded its global growth forecast for 2013 to 2.2% from 2.4%, citing a deeper than recession in Europe and slower growth in both China and India than were expected back in January when the forecast was last updated. The LME, which, like the Tokyo Stock Exchange, was still fretting over possible Fed tapering last night, shrugged off the US data and WSJ speculation and sold base metals once more. Copper fell 1%.
The Chinese don’t seem to care. With the holiday break over, spot iron ore rose US$1.10 yesterday to US$112.00/t.
The oils decided to follow the strong US retail sales data, with Brent up US76c to US$104.25/bbl and West Texas up US79c to US$96.67/bbl.
The SPI Overnight jumped 58 points, or 1.2%.
US industrial production is out tonight, which may provide some more fuel, but either way the world is now holding its breath until next Wednesday night’s Fed statement and press conference. Speculation between now and then will drive the madness.
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