Daily Market Reports | Mar 26 2014
By Greg Peel
The Dow closed up 91 points or 0.6% while the S&P gained 0.4% to 1865 and the Nasdaq rose 0.3%.
It was a resilient session on Bridge Street yesterday as the ASX 200 crawled back from opening lows. The stock market does not appear overly concerned about the recent up-trend in the Aussie dollar, which over the last 24 hours has risen another 0.3% to US$0.9164. The Aussie has been trending higher ever since the RBA made it fairly clear there would not be another rate cut anytime soon and economists began to dismiss their earlier rate cut expectations.
By rights the currency should be lower as the proxy for China. But it seems China has now taken over the “bad news is good news” theme from the US. The weaker the data become, the more the market assumes Beijing will again ease off on the financial reform program and provide some more stimulus. Hence the Australian stock market is holding up as well.
Good news is back to being good news in the US now all and sundry is accepting QE tapering and inevitable interest rate rises. Stock market direction hinges on the data, and in particular signs activity is recovering following the harsh winter. Last night provided much to chew over.
House prices in the 20 major US cities fell 0.1% in January, marking the third straight month of falls. Year on year prices rose 13.2%, down from the 13.7% peak in November. On a seasonally adjusted basis, and bearing in mind most cities were snowed in during January, prices rose 0.8%. The seasonally adjusted FHFA measure of house prices, for those houses across the country under Fannie/Freddie mortgages, rose 0.5%.
Sales of new homes fell 3.3% in February to a five-month low, reflecting both the weather and higher mortgage rates. Mortgage rates are unlikely to go anywhere but higher still now the Fed seems fixed on its tightening path.
March readings from the New York and Philly Fed regions of manufacturing activity, released last week, did show a recovery this month form the snowbound previous months. But last night the Richmond Fed index disappointed with a fall to minus 7 from minus 6 when economists had assumed a rise to plus 4.
Confounding what might otherwise be a subdued and possibly worrying set of data releases was the Conference Board consumer confidence index, which showed a rise this month to 83.5 from 78.1 in February when economists had expected a mere tick up to 78.4. Perhaps everyone just feels happy now the snow has stopped falling.
There is nothing definitive in last night’s data set, so unsurprisingly Wall Street posted another meandering session, rising from the bell, falling back to almost square and then rising again in the afternoon. Despite a solid finish the indices remain below their recent highs. As we approach the end of the March quarter, attention is beginning to turn to the quarterly earnings season which will kick off early next month. Presumably the whole weather debate will be rekindled if results disappoint.
Germany’s IFO measure of business confidence last night saw a fall to 110.7 from 111.3 in February, breaking a four-month rise. The Crimean issue was cited as the culprit.
The US dollar index stood still at 79.94 last night, the ten-year bond yield was also steady and so was gold, up a tad to US$1312.30/oz.
Anglo American has temporarily shut down a copper mine in Chile following violent worker protests, helping copper to a 1.5% gain on the LME last night. Metals traders are also of a mind Beijing will soon be forced to provide stimulus, which would imply a bottom has been seen after recent base metals weakness. All metals, bar a recently high-flying nickel, were stronger. Spot iron ore rose US$1.30 to US$111.80/t.
There was little movement to speak of in oil markets last night.
The SPI Overnight rose 19 points or 0.4%.
Data releases over the next 24 hours will be concentrated in the US, where February durable goods and a flash estimate of the March service sector PMI will be in the spotlight.
Rudi will appear on Sky Business at 5.30pm.
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