Daily Market Reports | Jun 17 2013
By Greg Peel
Fed, Fed, Fed. That’s all anyone can talk about right now. We can only hope that by the time Ben Bernanke’s press conference wraps up on Wednesday night the world is left in no doubt as to what the US central bank’s policy intentions are in the near term. Few believe a taper will be specifically announced given a lack of consistency in recent economic data.
Friday was clearly a square-up day ahead of the weekend and the Fed policy meeting. In Australia, which has suffered a weak stock market, it was a case of a blistering short-covering rally. The rally came despite more volatility in the Aussie, albeit the currency appears to be trying to stabilise at this level. For the US, which has maintained a mostly resilient stock market, it meant selling positions on a just in case basis.
The Dow fell 105 points, or 0.7%, the S&P lost 0.6% to 1626 and the Nasdaq dropped 0.6%.
Not that Friday’s US data releases were supportive of a taper. Industrial production growth was flat in May, while the fortnightly Michigan Uni consumer sentiment measure showed a fall to 82.7 from 84.5 at the end of May. The May reading was, nevertheless, the highest since 2007, but economists had expected a first June number to show an increase to 84.7. The May Producer price index jumped 0.5% on the headline, driven by higher energy and food costs, when the expectation was for 0.1%. The jump is unlikely to hurry the Fed into tapering however, given the core PPI rose by only 0.1% as expected.
The US dollar was down only slightly on Friday, to 80.63 on its index. Squaring up was also evident in US bonds, with the ten-year yield falling 5 basis points to 2.12%. Gold rose US$4.80 to US$1390.10/oz. The Aussie is down 0.7% from Thursday at US$0.9578, but most of the fall occurred during the local session on Friday, after a sharp short-covering bounce earlier.
Trading on the LME was subdued, with traders also eyeing this week’s Fed meeting. Small rises were posted. It was a different story for the oils now that the US is prepared to arm the Syrian rebels. On fears of an escalation in regional tensions, Brent crude rose US98c to US$105.93/bbl while West Texas lifted US$1.20 to US$97.85/bbl.
Spot iron ore picked up US$1.60 to US$113.60/t.
The SPI Overnight fell 26 points, or 0.5%.
There is little point in further discussing what the Fed might do or say on Wednesday night. By rights markets should be quiet in the lead-up, but rampant speculation and rumour has all global markets jumping at shadows right now, with concerns over Japanese policy an added element. Fed notwithstanding, it will be a busy week in the US data-wise.
Tonight sees housing market sentiment and the Empire State manufacturing index, and Tuesday brings the CPI and housing starts. On Thursday it’s existing home sales, the Conference Board leading index and the Philadelphia Fed manufacturing index, along with a flash estimate of the US manufacturing PMI for June. On Friday it’s the quadruple witching expiry of equity derivatives.
The eurozone will also see a flash estimate of its PMI on Thursday, following on from the ZEW investor sentiment survey release on Tuesday. China will post property price data on Tuesday and HSBC will provide a flash manufacturing PMI on Thursday.
It’s a quiet week economically in Australia. Today sees May vehicle sales, and tomorrow the minutes of the June RBA meeting will be pored over for any clues of another rate cut. The RBA’s June quarter bulletin is due on Thursday, and Thursday also sees the expiry of SPI futures and options and ASX index options.
On Friday a reasonably significant rebalance of the ASX/S&P indices will come into effect at the close, featuring several promotions and relegations.
Bring on Uncle Ben.
Rudi will appear on Sky Business today at 11.15am, Wednesday evening at 5.30pm and Thursday at noon.
For further global economic release dates and local company events please refer to the FNArena Calendar.
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