Daily Market Reports | Sep 10 2013
By Greg Peel
The Dow rose 140 points or 0.9% while the S&P gained 1.0% to 1671 and the Nasdaq added 1.2%.
Bridge Street had a solid session yesterday but it had little to do with the election. The election result was all but known last week if not before, and if anything there may be some concern over a Senate which, through apparent manipulation, has become a peanut gallery. ABC radio/TV revealed last night that the last word on major legislative changes proposed by the Coalition may come down to the approval of a guy who got in because his party was the “A” box above the line, who supports guns for all and will veto anything involving increased tax; a footballer who has no opinion on anything other than grassroots sport; a footballer who, perhaps like all of us, would like to avoid a “double disillusion”, and a guy who likes to dak his mates on camera.
Looking forward to some maiden speeches.
Bridge Street did little yesterday until the Chinese inflation data came out, which showed a 2.6% year on year CPI rise as expected, down from 2.7% in July. The PPI fell again, by 1.6% year on year, better than a 1.8% expected fall, and much better than the 3.6% annual rate of deflation a year ago.
The slowing in the rate of PPI deflation further supports the view the Chinese economy is turning around from its slowdown, while the stable CPI suggests no reason for the government to tighten policy further. Beijing may still look to tighten credit access in the property market but incentives for infrastructure and public housing construction provide a balance.
Bridge Street was also happy with the local housing finance data which showed a better than expected 2.4% rise in July. Economists have come to the conclusion that it’s wealth, not wages, which drive positive consumer sentiment, and a strong housing market implies growing wealth. The flipside to that, however, is the potential for the RBA to back down on further rate cuts given the bulk of housing finance growth represents investor rather than homeowner demand.
Over on Wall Street, traders had both the strong Chinese export data delivered on Sunday as well as the improving inflation data to assess. Wall Street liked it, with material stocks and industrial cyclicals such as Caterpillar all receiving a boost. But perhaps most important was a development on Syria which may yet prevent US military involvement.
Obama is caught between the rock and hard place of being a Democrat president feeling he should play the Republican card, only to find that not even the Republicans want another war, even if it is brief. Because it’s never brief. And Americans just want to get the hell out of Iraq and Afghanistan and go back to their lives with a reduced threat of terrorism. Bomb Damascus and it will be fear in the streets yet again. It was looking like Congress would offer up an embarrassing veto against the president but then along came Russia to offer the diplomatic solution.
Russia has called on its ally Syria to hand over its stockpiled chemical weapons in order to avoid a US response. Given Assad denies the use of chemical weapons it is not yet known how this will go down in Damascus, but as far as America is concerned it sounds like a great idea. It does mean Russia will be seen as global policeman and not the US but really, who cares? With North America becoming more energy self-sufficient every day, why not just leave the Islamic world to sort out its own problems?
Wall Street is assuming no strike. It is also assuming, given the weak jobs report on Friday, that the Fed will be in no rush to start tapering sharply. The Chinese data are looking better, and the summer holidays are now over and everyone’s back to work and ready to buy as soon as all these obstacles are cleared.
The Russian offer, on top of what was looking like Congressional defiance, was enough to take the heat out of the oils last night. Brent fell US$2.83 to US$113.23/bbl and West Texas fell US$1.54 to US$108.99/bbl. Not even the energy companies would begrudge a lower oil price at this stage, given a potential price spike would have impacted heavily on the US economic recovery.
LME traders also had the Chinese export data to consider last night, as well as the inflation data, and other developments. They weren’t quite sure what to do, so the metals went nowhere.
Gold slipped only slightly to US$1386.80/oz and the US dollar index fell 0.4% to 81.82 as it continues to bounce around in a pre-tapering range. The Aussie is enjoying a China-driven bounce and is up another 0.4% at US$0.9227.
Spot iron ore rose by US70c or 0.5% to US$134.80 a tonne.
Wall Street’s jump last night involved Chinese data already factored in on Bridge Street, so the SPI Overnight closed up a less excitable 11 points or 0.2%.
There will be more data out from China today, being the monthly “dump” of industrial production, retail sales and fixed asset investment numbers. The local NAB business confidence survey is also due, obviously concluded before the election.
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