Daily Market Reports | Apr 04 2014
By Greg Peel
The Dow closed flat while the S&P lost 0.1% to 1888 and the Nasdaq fell 0.9%.
Australian retail sales rose 0.2% in February having risen 1.2% in January, missing the 0.3% consensus forecast. Quite frankly, the retail sales data are not worth the paper their written on. They do not include domestic online sales (let along offshore) and represent only a small sample set of large retailers. The selection of retailers rotates each month, so we’re not even comparing apples to apples from one month to the next.
But it’s all we’ve got between quarters (the spending segment of the GDP calculation differs and is more comprehensive, including domestic online), and that’s why the Aussie is down 0.2% to US$0.9229. It’s also why the ASX 200 ran out of steam yet again yesterday and once more failed to meaningfully break out of the gravitational pull of 5400.
The longer the index spends trying punch ahead without success, the more likely it is the next move of significance will be down. Volumes have fallen away on Bridge Street and we’re about to enter a period of school holidays and consecutive Easter/Anzac long weekends. Three days off gets you a ten day holiday. Then it’s May. And we all know what happens in May.
On the subject of dodgy data, the Australian service sector PMI for March fell to 48.9 from 55.2 in February, basically reversing the jump up from January. From healthy expansion back to contraction in a heartbeat. Every other PMI around the world moves incrementally, but Australia’s fly around like an aerobatics team. No wonder the market pays not the slightest bit of attention.
The irony, of course, is that the entire world pays very close attention to the Chinese PMIs, agonising over every 0.1 of movement from month to month. Yet no one trusts data out of Beijing – not even the Chinese. Yesterday saw Beijing’s service sector PMI drop to 54.5 from 55.0, while HSBC’s independent number rose to 51.9 from 51.0. Direction almost never varies between these two different surveys, but in one month we’ve had Beijing’s manufacturing PMI go up and HSBC’s go down and Beijing’s services PMI go down and HSBC’s go up.
How much can a koala bear?
No wonder it was quiet on Bridge Street yesterday, notwithstanding tonight sees the US jobs number. The number will be important in confirming the weather effect, given a couple of shockers in the last two months. Economists are looking for 200,000. I suggested yesterday Wall Street might be flat last night ahead of the release and indeed it was, with the exception of the Nasdaq which lately is moving around more violently than an Australian PMI.
The Dow banged up against an all-time high last night but took a step back at the close. No one much cares about the Dow but there is some traditional psychological impact there, although in this case it is watered down by the fact the broad market S&P 500 is already in blue sky.
Attention last night was mostly directed at Europe, where the ECB elected not to cut its cash rate despite much speculation. While not using this particular monetary tool, the eurozone central bank board did however have an “ample and rich” discussion about implementing some form of quantitative easing in order to stave off deflation. This was enough to send the euro down against the greenback, but as ECB President Mario Draghi conceded at his press conference, the mechanics of a QE program were not hashed out. The Fed can implement QE simply by buying US bonds. The eurozone has no collective bond.
The eurozone service sector PMI fell to 52.2 from 52.6 while the UK equivalent dropped to 57.6 from 58.2. The UK numbers are easing, but only to supercharged from turbocharged. The US number rose to 53.1 from 51.6.
The falling euro sent the US dollar index up another 0.3% to 80.46. Gold nevertheless held on, falling only US$2.90 to US$1287.20/t.
Base metal price moves were mixed and insignificant outside a 1% gain for tin, while spot iron ore rose US20c to US$115.50/t.
A rise in the US service sector PMI was used for the excuse as to why West Texas crude rose US80c to US$100.42/bbl. Not sure what the connection is there. Having fallen sharply for two days, Brent rebounded US$1.66 to US$106.22/bbl despite the suggestion a deal is close to being struck with the Libyan rebels who have been blockading Libyan oil terminals for some time.
The SPI Overnight fell 6 points.
Non-farm payrolls in the US tonight. Consensus is for 200,000 which would represent a big jump from the last two months’ results and confirm that the US suffered from severe weather earlier in the year. A bad result would bring weather into question and support suggestions the US recovery is actually slowing. But if that is the case, chances are the Fed might ease off, that is, taper the taper. So anything could happen.
Clocks go back in relevant Australian states this weekend. On Tuesday morning the NYSE will close at 6am Sydney time.
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