Daily Market Reports | Apr 01 2014
By Greg Peel
The Dow closed up 134 points or 0.8% while the S&P gained 0.8% to 1872 and the Nasdaq added 0.7%.
Yesterday in Australia and last night on Wall Street saw trading for the close of the March quarter and the window dressers were out in force. After a solid rally in the previous two quarters, March proved a more choppy affair as companies attempted to justify the PEs they had been granted before a backdrop of weather-related issues, central bank policy uncertainty and a new round of geopolitical risk.
It came down to the wire in the end and fund managers always prefer to show a positive quarter if possible, thus encouraging further investment. They gave it a red hot go in Australia yesterday in trying to push the ASX 200 above the technically important 5400 level but a late fade meant a close of 5394, up 0.8% for the quarter. Wall Street almost managed to close on the highs of the day, booking a 1.3% gain for the S&P 500 for the quarter. The Dow was down 0.7% and after bubbling early in the quarter before busting late, the Nasdaq was around square.
Attention turned to Fed Chair Janet Yellen last night and her first public speech since her opening stumble at her debut press conference early in March. In her press conference Yellen shocked markets with an ingenuous “six months, that sort of thing” call on how soon the Fed would lift interest rates once tapering was complete. Last night, and no doubt sobered from the experience, the Chair adopted the Granny Yellen persona in noting that while the US economy may be recovering, it still feels like a recession for many Americans. Hence the Fed will maintain its “extraordinary” support for the economy “for some time”.
Arguably this comment offered up no real change to what Yellen had said previously and indeed what she had said previously marked no real change from the policy laid out by Ben Bernanke, but Wall Street was nevertheless relieved.
Not so much of a relief was the result for the Chicago PMI in March, which crashed to 55.9 from 59.8 in February. Wall Street is looking for signs weak data earlier in the year were weather-impacted, which would mean some improvement henceforth. Consensus had the PMI at 60.
Wall Street nevertheless took heart over the diplomatic progress made over the weekend between the US and Russia with regard Ukraine. And in another case of the “bad news is good news” theme, a flash reading of the eurozone CPI showed an annualised rate of 0.5% in March, down from 0.7% in February and below 0.6% expectations. Germany’s Bundesbank has now reportedly given its approval for the ECB to provide some sort of QE-style stimulus in order to stop Europe heading into deflation.
But as noted, it was mostly about showing a positive books close last night. The S&P 500 closed the quarter only 6 points shy of its all-time high so we can put March to bed and start looking ahead to the spring thaw and what else the June quarter might bring. March earnings results will shortly starting rolling in.
The US dollar index was again little moved last night at 80.10 but gold fell another US$12.60 to US$1282.20/oz. The Aussie is 0.2% higher at US$0.9270.
Base metals were mixed but iron ore surged US$4.50 to US$116.80/t. Do Chinese traders play window dressing games? Either way, iron ore is down 13% for the quarter. The oils continue to slumber, and last night Brent was off a bit at US$107.75/bbl and West Texas was off a bit at US$101.49/bbl.
In a nod to the belief last night’s rally on Wall Street means little fundamentally, the SPI Overnight is up only 4 points.
The first day of the new quarter on Bridge Street will be an interesting one. It’s manufacturing PMI day today and while the market pays scant attention to the local number, both Beijing and HSBC will release PMIs for China today and on recent performance one would have to suggest bad results will be positive for the market, given the stimulus implication.
As an aside, it was an interesting Four Corners last night, focusing on excessive Chinese debt, although I thought it remiss there was no mention of China owning about a third of America’s debt.
Manufacturing PMIs are also due from the eurozone, UK and US tonight. The RBA will meet today and leave its rate on hold, but forex markets will be hanging on every word.
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