Daily Market Reports | Feb 25 2014
By Greg Peel
The Dow closed up 103 points or 0.6% while the S&P gained 0.6% to 1847 and the Nasdaq added 0.6%.
The local index tried hard but struggled to gain traction yesterday and ultimately loped its way to a flat close. The session began with a 14 point handicap for the ASX200 as some big names went ex-div, and earnings results on the day were mixed. Another round of weak Chinese data at midday crimped any momentum.
Average home prices in China’s 70 major cities eased to a year on year growth rate of 9.6% in January from 9.9% in December. Hardly the stuff to inspire a leap from the office window, but it’s the first easing of the rate since November 2012. The mention of “China” and “property” in the same sentence is enough to turn the odd economist pale, albeit it has been Beijing’s policy for some time to contain the Chinese housing bubble through lending restrictions. The January data might suggest Beijing’s policies are finally beginning to work, or that the Chinese property market is about to collapse in a flaming heap and send the global economy into meltdown, or that early lunar new year in 2014 was mostly responsible for the blip and things will be back to normal forthwith.
Chinese property developers subsequently copped it on the Shanghai exchange yesterday, nevertheless, sending the Chinese index down 1.8% and helping to keep a lid on Bridge Street. With the ASX200 trading around its post-GFC high, a little work is likely needed to push through to fresh “blue sky”. (Not true blue sky, but the October 2007 high of 6828 seems an awfully long way away.)
Last night’s session on Wall Street may provide more upward impetus, although momentum did fade significantly to the close. From a strong open the S&P 500 breached its previous all-time high of 1848 and prompted technical buying and short-covering to send it racing to an intraday peak of 1858. At that point the Dow hit 16,300, up 197 points, and aside from being a round number the Dow has not posted a 200-plus point rally in 2014. Momentum faded, and the selling picked up pace into the afternoon until the S&P finally settled at 1847 – a tick under the previous closing high.
With the US earnings season now pretty much in the bag the attention has turned to M&A activity, which has picked up considerable pace. “Merger Monday” they call it on Wall Street, given for some reason US companies all pitch their takeover bids on a Monday. The action was hot again last night, particularly in the tech space. Last week’s US$19bn bid for WhatsApp from Facebook, gazumping Google in the process, has rather stirred up the hornets’ nest. And there is talk Apple for some reason is interested in Tesla. The iCar?
A solid jump in Germany’s IFO business sentiment index was also fodder for strength on Wall Street. An easing of tensions, somewhat, in the Ukraine was seen as a positive. And there was also a nod to Sydney’s G20 finance ministers’ meeting and the 2% additional global growth target (over five years). At least talk is now of growth and not further austerity, analysts offer.
There were no major US data releases last night to spark up the greenback so the US dollar index is again little changed at 80.23. Gold is also steady, at US$1337.90/oz, while yesterday’s suggestion by Deutsche Bank that the Aussie could fall to 66c had the effect of sending the currency up 0.7% to US$0.9036.
Base metals were mixed but mostly weaker last night while iron ore suffered a big drop, falling US$2.50 to US$119.90/t, which will likely weigh on the sector on Bridge Street today.
Clashes in Libya and the subsequent closure of an oil field is impacting on oil prices, with Brent up US86c to US$110.60/bbl last night and West Texas up US44c to US$102.64/bbl.
The SPI Overnight closed up 27 points or 0.5%.
There is quite a raft of US data due tonight but not before we get through another solid round of earnings releases in today’s local session.
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