Daily Market Reports | Feb 03 2015
By Greg Peel
The Dow closed up 196 points or 1.1% while the S&P gained 1.3% to 2020 and the Nasdaq added 0.9%.
The ASX200 rose for the fifth straight session yesterday as it continues to be buoyed by a recovery in materials and energy stocks. Materials chipped in with a 0.9% gain yesterday despite an ever-falling iron ore price, while energy once again led the charge with a 1.8% gain, aided by the oil price bounce.
Australia’s manufacturing PMI showed the sector continues to contract, albeit the January number showed improvement to 49.0 from 46.9 in December. TD Securities inflation gauge for January showed a 2.3% annual underlying rate – inside the RBA’s comfort zone – while a headline 1.5% mostly reflects lower oil prices. The RP Data-Rismark house price index showed house prices are on the move up again, which tends to make home owners feel happy.
HSBC confirmed the contraction of China’s manufacturing sector yesterday, although this independent reading already showed contraction in December. Indeed HSBC’s number ticked up to 49.7 from 49.6. Japan showed ongoing improvement, with its PMI rising to 52.2 from 52.0.
There were smiles in the UK where the manufacturing PMI has been sliding for a few months, albeit from earlier dizzy heights, given a rise to 53.0 from 52.7. Even the eurozone looked promising, on a rise to 51.0 from 50.6. It was just left to the US to let the side down, on a larger than expected fall to 53.5 from 55.1.
It had also been assumed Americans would embrace the opportunity provided by cheap fuel costs and spend big in the Christmas month, but alas this did not prove the case. To compound the PMI disappointment, consumer spending fell 0.3% in December which, surprisingly, is the biggest December drop since the depths of the GFC in 2009. Incomes, on the other hand, rose 0.3%, aided by lower inflation. Weak income growth was a concern for economists, and the Fed, in 2014.
The weak US data combined to see the Dow down triple digits from the opening bell last night. But 2015 to date is the year of confusion, and so by midday the average had turned around to be up triple digits. Further solid gains in oil prices no doubt helped. But at 2.30pm, the Dow was back on the flatline, and by the close, up 196. How on earth does one read this market? The speed in which the US indices are moving at present is extraordinary, while still getting a whole lot of nowhere fast.
Dare we mention HFT?
There had been talk on Friday night that the big bounce in the oil price – 8% on settlement for West Texas Intermediate – was a knee-jerk short-covering rally that would prove short-lived. Well last night perhaps saw more short-covering from the slow movers, although news of a strike over pay and conditions at one of America’s biggest refineries no doubt helped oil higher. West Texas rose US$1.84 or 3.9% to US$49.41/bbl while Brent rose US$2.41 or 4.6% to US$54.49/bbl.
Gold has also been doing a good yo-yo impersonation these past few sessions, underscoring general monetary confusion, but last night steadied at US$1279.70/oz. The weak US data saw the US ten-year yield recover 2 basis points to 1.69% and the dollar index fall 0.2% to 94.51, and the Aussie is up 0.4% to US$0.7810, likely seeing a square-up ahead of today’s RBA meeting.
LME traders saw a mixed bag of global manufacturing PMI data – Japan, UK and even Europe looking okay but China a concern and the US losing steam – and offered up a mixed bag of base metal price movements, none overly substantial.
Iron ore fell yet again, by US40c to US$61.30/t, to its lowest level since May 2009.
The futures on the ASX200 have been almost as volatile as the Dow Jones of late, without necessarily being reflected in movements in the physical index. The SPI Overnight is up 42 points or 0.8%, but does the ASX200 have yet another 40 points in it today? The local index has to a great extent been ignoring the volatility on Wall Street lately.
The RBA will meet today and we’ve all heard the debate. Tune in at 2.30pm. Australia will also see building approval and trade numbers today.
The trickle of early earnings reports continues ahead of the flood beginning next week, with Navitas ((NVT)) on the blocks today.
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