Daily Market Reports | Dec 05 2014
By Greg Peel
The Dow closed down 12 points while the S&P lost 0.1% to 2071 and the Nasdaq was flat.
Who said Australia’s economy was in trouble? Economists were expecting retail sales to rise by 0.1% in October but instead they rose by 0.4%, to mark 5.7% annual growth. Meanwhile, the value of iron ore exports rose 4.3% in October, helping to reduce Australia’s trade deficit. All the focus is on lower iron ore prices, and that’s fair enough for marginal players, but the lower cost producers are pumping up the volume and China is taking what it can get. The falling Aussie is also providing a valuation tailwind.
The market certainly liked it, sending the materials sector up 1.8% yesterday. The banks are back in favour on expectations of a rate cut, which is not likely to happen on yesterday’s data, and despite the potential implications of the pending Murray Inquiry recommendations. They were up 0.9% yesterday. One of the only sectors that didn’t join in was consumer discretionary – the beneficiary of stronger retail sales. The Silly Season is certainly upon us.
Someone pulled the string in Mario Draghi’s back last night, and he said the ECB is prepared to implement more easing next year if necessary. The market continues to wonder just what “necessary” looks like for Europe, and was disappointed with another ECB policy meeting that produced no result. It was enough for the Dow to be down almost 100 points late morning.
But then a Bloomberg report hit the wires, citing the usual “unnamed central bankers”, which suggested the ECB is expected to consider a proposal for broad-based asset purchases (QE) in January. By lunch time the Dow popped its head up into the green, marking a new intraday high, before fading away again to the close. Tonight sees the November jobs report, and as usual that is the focus of attention.
Currency markets remained disappointed in yet another “all talk and no action” press conference from Draghi, nevertheless, resulting in a sharp short-covering rally in the euro. That pushed down the US dollar index by 0.4% to 88.62. The Aussie also saw a short-covering rally, on the release of the strong retail sales number yesterday, but it proved short-lived. Indeed the Aussie is another 0.3% lower this morning at US$0.8381.
LME traders had been concerned an announcement of further QE measures from the ECB would send the euro south and thus the US dollar north, impacting on US dollar metal prices. As there was no announcement, all metal prices rose in relief, including a 1.5% gain for copper and 3% for nickel. The shutters had come down on the LME, however, by the time the Bloomberg report suggested January is the month of action.
The oils continue to drift, having now found their new levels for the time being. West Texas fell US52c to US$66.79/bbl last night and Brent fell US40c to US$69.47/bbl. News reports in the US showed gasoline being sold at servos, or gas stations if you like, for under US$2.00 a gallon. Earlier in the year, when Russia was annexing the Ukraine and the world first heard of a new bunch of fruit cakes called ISIS, Americans were paying over US$4.00 a gallon.
Imagine 80c per litre petrol downunder. You’d drive to Perth just for the heck of it.
Iron ore was not drifting last night, it must be said. It was up US$1.60 to US$71.10/t. This time I won’t suggest maybe we’ve found a floor.
Gold was steady at US$1208.60/oz.
The SPI Overnight closed down 2 points.
Australia will see the November construction PMI today, while over in Germany, factory orders data will be closely watched apropos of possible QE in January. All attention will of course be on the US jobs numbers, and a number around 230,000 is once again forecast. Wall Street is a little excited that if it’s a good “beat”, we may see Dow 18,000.
S&P will announce the quarterly rebalance of the ASX200 and other indices today, resulting in the promotion of one or more stocks and the relegation of others. This is important for those equity funds which track specific indices, or which are restricted to choosing from only those stocks in a particular index.
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