Daily Market Reports | Mar 07 2014
By Greg Peel
The Dow closed up 61 points or 0.4% while the S&P gained 0.2% to 1877 and the Nasdaq eased 0.2%.
Who said the Australian economy was struggling? The recent run of data releases would rather suggest otherwise. Yesterday we saw January retail sales surging 1.2%, up from December’s 0.7% gain. Consumers are meant to max out the card before Christmas and cry poor in January. That’s a 6.2% annual rate of growth which is highest since November 2009, when many Australians were out spending their Pennies from Kevin. It is a rate akin to the heady days of the pre-GFC boom.
And we saw a near tripling of the trade surplus from December to January, with a 3.7% rise in exports outstripping a 0.8% rise in imports. We can thank the lower Aussie to a great extent – our iron ore and other exports bring in more Aussie per tonne etc and the higher cost of general imports reduces spending on imported goods. We can also, ironically, thank the peak in the mining capex boom. Not only is production now running full steam (see exports) but miners are no longer importing loads of expensive equipment and construction components.
The result of yesterday’s round of data was to turn Bridge Street around from a soggy start to finish the day square. And of course there’s always a penalty – the Aussie is up 1.2 cents to US$0.9093. Just as well Joe’s about to go and spend lots of money on us all.
Over in Europe, the ECB held a policy meeting last night and left its cash rate on hold. In his press conference President Mario Draghi continued to brush off talk of deflation, further watering down the likelihood of any rate cut. The euro surged and the US dollar index fell 0.5% to 79.68.
Over in the US, the market is now starting to blame even the positive economic data on the snow. Last week new jobless claims fell substantially, hinting at perhaps a good non-farm payrolls result tonight, but then no one could get down to the employment office. Meanwhile, January factory orders fell by 0.7% when a 0.6% fall was expected and chain store sales rose 2.7% (yoy) in February when 3.0-3.5% was expected. That’s okay, blame the snow.
Last night’s round of Fedspeak did little to encourage Wall Street. The New York Fed president suggested the US economy would look better in 2014 than in 2013 but the Atlanta president suggested he was very worried about the unintended consequences of QE, which might crimp economic growth for years to come. The Philadelphia president said he was worried about the impact of exiting QE and the Dallas president said he was worried a bubble might be forming in the stock market.
Am I bovvered? The Dow rose 61 points, although admittedly it peaked at 90 points up before some afternoon selling, and the S&P fell short of a new all-time high.
The gold market did pay a little more attention to the Fedspeak, and with assistance from the weaker greenback rose US$12.00 to US$1351.00/oz.
Base metals were in a positive mood on the weaker greenback and encouraging talk from the ECB, with aluminium up 1% and nickel up 2.5%. The oils arrested their slide in the wake of eased tensions in the Ukraine, with Brent up US67c to US$108.51/bbl and West Texas up US42c to US$101.87/bbl.
Iron ore rose US20c to US$116.90/t.
The SPI Overnight rose 9 points.
Tonight is the all-important US jobs report but realistically no one knows what the number might be or how to respond to it whatever it is. Forecasts are all over the shop and the excuses are all lined up ready for deployment.
China will release trade balance and inflation data over the weekend.
And Australia’s construction sector PMI is due today. Another winner?
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