Daily Market Reports | Apr 14 2015
By Greg Peel
The Dow closed down 80 points or 0.5% while the S&P lost 0.5% to 2092 and the Nasdaq fell 0.2%.
China Woes
One might be forgiven for believing the only reason local traders are keen to make the push to the summit of 6000 for the ASX200 is because, a la mountaineering, “it is there”. Fundamental reasons for such an expedition are difficult to narrow down at this point.
And so it was that in the first hour of trade yesterday the index jumped up 28 points to hit 5996 before grateful sellers moved in to capitalise. The index then drifted lower until a bombshell was dropped around midday, being China’s March trade figures.
Chinese exports fell 14.6% year on year in March and imports fell 12.3%. Both numbers were much worse than expected. Economists are now suggesting the March quarter may be the first in which Chinese GDP growth falls below 7%, which is Beijing’s target for 2015. The result will be known on Wednesday.
Unsurprisingly, the materials sector led the market down in the afternoon with a 1.4% fall within what was a small negative close for the index. Yield stocks again were the balancing act.
There was further consternation when Joe Hockey suggested, presumably because having been caught out previously, that the government may use a US$35/t iron ore price assumption in the upcoming “dull and boring” budget. Given spot iron ore is trading over ten dollars above this level, and every dollar is worth millions for government revenues, the presumed flipside for the nation’s coffers is to pick up the difference elsewhere through spending cuts and/or tax increases.
Jittery Wall Street
Speaking of Joe Hockey, someone doing a very good impersonation of the Treasurer brought down the gavel on NYSE trading this morning.
Wall Street turned a 50 point positive Dow opening into an 80 point loss by the close last night, as nervousness crept in with regard this week’s big bank earnings results. The Industrial Average thus retreated back below 18,000, the S&P fell back below 2100 and the Nasdaq, having opened above the historical 5000 mark, also slipped back.
Evidence of nervousness was provided by last night’s move in the VIX volatility index on the S&P500, which jumped 11%. This implies investors were buying option protection ahead of what might happen this week because frankly, no one’s quite sure. US companies release earnings results and guidance every quarter, but this quarter has garnered a higher level of anxious anticipation than most of late. With forecasts downgraded to net flat earnings growth, Wall Street is impatient to learn the true impact of the surging greenback, of the apparent slowdown in US economic growth, and of the weather over the quarter.
JP Morgan (Dow) and Wells Fargo kick off proceedings for the banks tonight, while consumer giant Johnson & Johnson (Dow) may through some light on the greenback impact.
Commodity Capers
If the result of weak Chinese trader data was a turnaround from a positive Australian stock market to a flat one, it was nothing compared to the impact on the Aussie. The local currency plunged on Beijing’s numbers and is down 1.2% over 24 hours to US$0.7589, with the US dollar index chipping in with a 0.2% gain to 99.49.
Mind you, we’re simply back around where we were before a seemingly more dovish Fed sparked a short-covering rally last month, now sitting near the bottom of the recently entrenched trading range.
What the Chinese data did not appear to do was cause any angst in commodity markets. Tin fell 3.5% on the LME last night, but that was related to inventories, while net weakness amongst the other base metals was fairly minimal.
Iron ore, believe it or not, jumped US$1.50 to US$48.80/t.
And it was a rare quiet night on oil markets, with west Texas drifting up US25c to US$52.04/bbl and Brent steady at US$58.02/bbl.
Gold continues to bang around the 1200 level with little in the way of conviction. It fell US$9.00 to US$1198.30/oz.
Today
The SPI Overnight closed down 15 points or 0.3%.
While earnings might be taking centre stage on Wall Street this week, traders will not be ignoring a substantial flow of economic data which bring into to focus the other area of consternation at present – Fed policy. Tonight sees retail sales, business inventories and the PPI.
Locally, NAB will release its monthly business confidence survey today.
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