Daily Market Reports | Feb 24 2014
By Greg Peel
The ASX 200 hit a new post-GFC closing high on Friday as it continued its persistent grind upwards on US resilience and local earnings report strength. We now enter the last frantic week of the earnings season featuring another avalanche of reports before it all comes to a screaming halt at the end of the month, being Friday in this case. The beat/miss ratio, on FNArena’s more subjective measure, is holding at around 3/2 at this stage.
It was stock option expiry day on Wall Street on Friday which often provides for non-market related volatility on the day. As it was, US stock markets began the session in the green once more with the Dow up over 50 points but as the day progressed the indices lost altitude, with last minute options covering cited as the cause.
The Dow closed down 29 points or 0.2% while the S&P lost 0.2% to 1836 and the Nasdaq fell 0.3%. After a week dominated by inconsistent Fedspeak and weather excuses, the S&P 500 finished slightly lower over the five days.
The weather was again in focus on Friday night with the release of the January existing home sales data, which showed a 5.1% fall to mark the lowest level since July 2012. There is no disputing the pace of home sales has slowed over the past six months as prices have risen beyond earlier bargain levels while mortgage rates have also ticked up. Yet the weak result was again easy to attribute to snow.
It will be interesting to see just what is revealed when the snow finally melts.
The weak US data nevertheless continues to ensure the US dollar remains static despite the pledge of ongoing Fed tapering. The dollar index was a tick down at 80.25 after Friday. Gold was relatively steady at US$1324.10/oz but the Aussie has drifted lower since Thursday’s weak Chinese PMI release, and was down 0.4% to US$0.8974.
Base metals were mixed and uneventful on Friday and spot iron ore fell US50c to US$122.40/t.
Brent crude dropped US59c to US$109.74/bbl while West Texas rose US13c to US$103.05/bbl.
The SPI Overnight closed up 2 points.
The headline news last night and this morning was the pledge by the G20 finance ministers to lift their collective rate of GDP growth (85% of global GDP) by 2% over five years. G20 pledges are, of course, always stringently stuck to and assiduously pursued (See: Doha, Copenhagen). Let us not forget these people are politicians.
Of more importance, or one might even say of any importance, was the push by the G20 to speed up reforms to the IMF which have been stalled in the US congressional process for some time. The IMF is back in the spotlight as the world watches the Ukrainian implosion – just the sort of dispute which, once settled, will likely mean the country needing some financial support.
The big news over the weekend at least involved one G20 member. Moody’s has lifted Spain’s credit rating by one notch to Baa2 from Baa3, or if you like from “OMG” to “keep me posted”, and suggested a “positive” outlook. Only a couple of years ago Spain looked like it would be the first really big domino to fall in the Club Med crisis, but the ratings agency suggested Spain had made faster than expected progress in rebalancing its economy away from real estate investment, the bubble and bust of which in 2008 nearly brought Spain to its knees in 2012.
While not significant in quantum, the Spanish upgrade is significant in underscoring the switch of focus away from further developed market disaster (When did we last hear a peep out of Greece?) and toward emerging market issues and the impact of developed market monetary policy tightening among other things. It’s not Spain’s banks we’re worried about now, it’s China’s.
This week’s snow-covered US data releases begin with the Chicago national activity index tonight, followed by the Case-Shiller and FHFA house price indices, the Richmond Fed manufacturing index and the Conference Board consumer confidence measure on Tuesday. Wednesday it's new home sales, Thursday durable goods and Friday sees pending home sales, the Chicago PMI and the first revision of the December quarter GDP result.
Japan will release a data dump of industrial production, retail sales, employment and inflation data on Friday.
In Australia we’re ramping up towards our own GDP result next week, with this week featuring December quarter construction work done on Wednesday and private sector capex on Thursday. Friday brings monthly private sector credit data.
And as noted, this week will be the busiest and thankfully the last in the local February earnings result season. There are too many companies reporting to choose highlights, so please refer to the FNArena Calendar.
Rudi will not appear on Sky Business today at 11.15am, but he will make an appearance on Switzer TV tonight between 7-8pm. On Wednesday he appears at 5.30pm and on Thursday at noon.
For further global economic release dates and local company events please refer to the FNArena Calendar.
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