The Overnight Report: Squaring Up

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By Greg Peel

The Dow closed unchanged and the S&P was flat at 1802 but the Nasdaq rose 0.6% to 4017.

Bridge Street struggled to find any reason for enthusiasm yesterday and it is little wonder with all the downbeat talk about. Not only did we have RBA deputy governor Philip Lowe telling us we’re destined for a lower standard of living unless productivity improves, we had Goldman Sachs suggesting Australia will be the lonely laggard in the 2014 global recovery. In both cases, the end of the mining investment boom and the gap to economic rebalance has been suggested as the major impediment.

We are also trading in what is an abbreviated week in the US that finds Wall Street positive but largely distracted at this point. But there were plenty of US data points to consider last night.

Housing starts data for October were due to be released but have been delayed due to lingering fallout from the government shutdown. Building permits, which precede starts, nevertheless showed a 6.2% jump to the highest level in five years. Take out lumpy apartment block permits, however, and single family home permits rose by less than 1%.

The Case-Shiller 20-city index showed house prices rising 0.7% in September or 13.3% year on year. That’s the fastest pace since the peak of the housing bubble in February 2006. The FHFA price index of houses on Fannie/Freddie mortgages rose 0.3% or 8.5% year on year.

The Richmond Fed manufacturing index leapt to plus 13 from plus 1 last month when economists had forecast plus 4.

All good, until the Conference Board monthly consumer confidence measure showed a fall to 70.4 from 71.2 last month when 72.4 was forecast. This is not encouraging news for retail sectors just ahead of the Black Friday kick-off to Christmas spending.

It was a mixed bag, and enough to see the Dow wobble its way to a session-high 42 point gain before the pre-holiday profit-takers moved in rapidly at the death. The big news nevertheless was a 0.6% gain for the Nasdaq which took the tech-heavy index to 4017 and its first breach of the 4000 mark for thirteen years.

Elsewhere, markets were quiet. The US dollar index fell 0.3% to 80.64 but the Aussie also fell further, by 0.3% to US$0.9131 and gold dropped back again, down US$8.20 to US$1242.10/oz.

Base metals did nothing and nor did the oils, much, with Brent down US10c to US$110.89/bbl and West Texas down US23c to US$93.86/bbl.

Spot iron ore fell US60c to US$135.90/t.

Bridge Street looks like it might be in for a soggy start, with the SPI Overnight down 18 points or 0.3%.

There’s another barrage of US data releases due for tonight, including durable goods, personal income and spending, the Chicago Fed’s national activity index and another consumer confidence measure, this time from Michigan Uni. Once those releases are absorbed it will be planes, trains and automobiles as Wall Street rapidly empties for the trek home to Mom’s, leaving only a few tumbleweeds to see it out to the close. At this stage it appears East Coasters may have to make that trek in a snow storm.

In Australia today all eyes will be on the September quarter data for construction work done, which is the first data point in the lead-up to next week’s GDP release.

There is another handful of AGMs to be held today, including Bank of Queensland ((BOQ)), while Programmed Maintenance ((PRG)) will release its interim result.

Rudi will appear on Sky Business this evening from 5.30pm.
 

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