Daily Market Reports | May 30 2014
By Greg Peel
The Dow closed up 65 points or 0.4% while the S&P gained 0.5% to 1920 and the Nasdaq added 0.5%.
On face value, yesterday’s Australian private sector capital expenditure numbers for the March quarter were disappointing. Capex fell 4.2% in the quarter when a fall of only 1.5% was expected. But economists are less concerned with the “was”, bearing in mind we’re now in the home stretch of the June quarter, and more concerned with the “what will be”.
The good news is that capex intentions numbers suggest that while mining investment will fall by around 15% in 2014-15, which is no great surprise, non-mining capex will rise by 4.5%, which is heartening. In the March quarter actuals, mining fell 8.7% and non-mining rose 2.0%. The transition is indeed underway, and it must be noted that the limited ABS data do not take into account capex intentions for a number of industries including agriculture, healthcare and education & training.
Add yesterday’s intentions result to Tuesday’s clear increase in residential construction within the construction work done numbers and the CBA economists continue to suggest the first RBA rate rise will be forthcoming in November. Mind you, there are still those who believe the next move is still likely to be down again, but the Aussie is this morning 0.8% higher at US$0.9307 and that’s all to do with the capex release.
Yesterday’s weaker ASX 200 was all to do with a 1.3% fall in the materials index driven by a new low for the iron ore price in this latest slide. The sector will be jittery again today given another US$1.10 drop overnight to US$95.70/t. Or perhaps, as was the case last week, the bargain hunters will step in.
Speaking of old news, ie the March quarter, the much anticipated first revision of the US GDP did indeed show a fall of 1.0%, down from the first estimate of a 0.1% rise. It’s the first contraction for the US economy in three years, and there’s another revision to go. Given the month of March saw a little less snow, the final result may be slightly less negative.
It didn’t much bother a well prepared Wall Street, which pushed the S&P up to a new all-time high for the thirteenth time this year. In more recent data, pending home sales rose 0.4% in April to mark a second consecutive increase.
So it’s onward and upward for Wall Street, despite ever falling bond yields (the ten-year was steady at 2.44% last night), and without the conviction of volume. Volumes year to date are some 11% below those of the equivalent period in 2013, and ASX numbers look little different. The lack of volume on days in which the S&P hits a new high concerns experienced investors, but then in the post-GFC era we must contemplate what the “new normal” in volumes might be. The offset to lower stock volumes is, of course, higher bond volumes.
The US dollar index fell back 0.1% last night to 80.49 while gold slipped a tad to US$1256.20/oz.
Base metal traders were not particularly enamoured with the US GDP revision, or at least used the opportunity to take some profits. Prices were mostly lower, with copper down 1% and nickel down 2%. As noted, iron ore fell another 1% last night.
A rise in weekly US crude inventories last week was confirmed but prices had adjusted on Wednesday night, hence West Texas fell only US61c to US$103.60/bbl and Brent fell US15c to US$110.12/bbl.
The SPI Overnight rose 10 points or 0.2%.
Monthly private sector credit data are due in Australia today. There’s a swag of Japanese data out today including the closely watched inflation number while tonight in the US sees releases for personal income and spending and consumer sentiment.
Beijing will release the official Chinese manufacturing PMI on Sunday, as is its wont.
Rudi will appear on Sky Business' Your Money, Your Call – Bonds versus Equities from 6-7pm tonight.
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