Daily Market Reports | Sep 09 2014
By Greg Peel
The Dow closed down 25 points or 0.2% while the S&P lost 0.3% to 2001 and the Nasdaq gained 0.1%.
Japan revised its June quarter GDP yesterday to show 7.1% contraction, exceeding the first estimate of 6.8%. It’s the fastest rate of contraction since 2009 and while it specifically reflects the impact of the April sales tax increase, vis a vis a surging March quarter ahead of the tax increase, it’s not exactly the way Abe wants to be heading.
The Bank of Japan put a positive spin on the Japanese economy last week when it left monetary policy unchanged, but the case for further QE is growing.
China reported a record trade surplus for August yesterday of US$49.8bn, beating expectations of US$49.0bn. Exports rose 9.4% year on year, beating forecasts of 8.0%, while imports fell 2.4% against a forecast 1.7% gain.
Beijing will be frustrated that its attempt to shift China’s economic focus to domestic-based rather than export-based is still proving a challenge. Canberra will be concerned imports of iron ore and coal dipped in August. China had been importing significant volumes of iron ore up till last month, with lower prices reflecting increased supply, but the August additional plunge in the iron ore price appears to be demand driven.
The Australian stock market didn’t seem to pay much attention to yesterday’s Asian data, and indeed the big iron ore miners found support while the juniors were again written off for dead. Consumer staples found support yesterday, as did the telco, while the banks were again sold off and energy was hit as well. Ignoring the ex-div effect, a shift to defensiveness is again apparent, as is general pressure on all Australian big caps.
But a funny thing happened towards the end of the session.
I have suggested recent big-cap weakness potentially implies there are foreigners “selling Australia” but that this would otherwise put pressure on the Aussie. The currency has nevertheless remained resilient, supported by ECB-driven euro weakness and, more recently, the potential for Scottish independence, which has sent the pound homeward tae think again.
But yesterday the Aussie started to slide late afternoon Sydney time and it continued to slide all night, to be down a cent this morning at US$0.9281. Chinese data? Japanese weakness? Both? These are after all our biggest trading partners.
So it’s good news for the Aussie, but not really the way we want it to be. The US dollar index did rise 0.6% to 84.29 last night but this more reflects weakness in the euro, yen and pound than it does strength in the greenback.
On Wall Street, the talking point of the session was US consumer credit. It increased by US$26bn in July to mark a record dollar value gain, and the biggest percentage rise in three years. Auto loans are providing the bulk of credit increase, which ties in with the auto buying spree Americans suddenly seem to be on.
Is this good news? Well a little bit of credit is a good thing but a lot is a concern (see: GFC).
Beyond that, Wall Street seems content to simply hug the S&P 2000 mark for the time being ahead of various factors playing out. Tonight sees Apple release a new product, albeit no one knows what yet (could be the iWatch, or iPhone 6, or even a payment system, but the latter is less likely given Apple is paying drones to queue up outside their stores), the IPO of China’s massive Alibaba website is nearing (it will be on the NYSE), and the geopolitical situation remains fluid.
To the last point, the EU officially announced increased sanctions against Russia just this morning which will specifically target the ability of Russia’s gas pipeline companies to raise capital in European markets.
Here we go. You nobble our pipeline companies, we shut off your gas. Just in time for winter.
Energy markets had shifted to after-market trading before this latest sanction news and we saw Brent down US55c to US$100.29/bbl and West Texas down US27c to US$93.15/bbl.
Base metals were quiet last night with the exception of nickel, which has found a second wind of price surge on the back of possible Philipino export bans alongside those of Indonesia. Nickel rose 1.7%.
The iron ore price remained unchanged last night at US$86.30/t, which might almost be cause for celebration.
The SPI Overnight closed down 2 points.
The SPI has looked like a pretty poor indicator these past few sessions but one has to appreciate that the futures price already accounts for dividends and thus, unlike the physical index, is unmoved by ex-divs on the day.
There is another handful of ex-divs to take account of today.
We’ll also see the NAB business confidence survey today along with housing finance data.
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