Daily Market Reports | Apr 15 2015
By Greg Peel
The Dow closed up 59 points or 0.3% while the S&P gained 0.2% to 2095 as the Nasdaq lost 0.2%.
Directionless
It was a soggy old day on Bridge Street yesterday, with nobody much wanting to come out and play. As we sit here at the foot of the 6000 peak wondering just what has to happen to get us up there, there is plenty to wait for ahead that is ensuring hesitance.
There is the US earnings season, which from this point will largely determine whether Wall Street can push ahead and provide a lead. And there is the ever present spectre of Fed rate rise speculation. Closer to home, today sees the release of China’s March quarter GDP result.
Finally, there is the upcoming federal budget. There has been a lot of talk about tax, a lot of talk about superannuation, and a lot of talk about the low iron ore price and its impact on the budget deficit. Investors have every right to be concerned about what Tony and Joe might have in store this time, and then whether any of it will get past Jackie Lambie. Tony Abbott will outline a budget “blueprint” in a speech today.
Glued to the screen will be Glenn Stevens, who will be anxious to know just what fiscal nasties the government has planned to make the job of monetary balancing even more difficult. Yesterday’s NAB business confidence survey for March showed a 3 point increase to plus 3, which merely reversed the 3 point decline in February ahead of the RBA’s February rate cut. Another rate cut is “baked in” to market expectations, but confidence will be boosted until that cut is in the bag.
Meanwhile, the IMF yesterday downgraded its 2015 economic growth forecast for Australia to 2.8% from the 2.9% forecast made last October, with weak commodity prices the primary excuse. Typically the IMF’s forecasts run about six months behind everyone else’s.
Mixed Messages
US retail sales rose an impressive 0.9% in March to mark the biggest jump in a year and reversing three straight monthly declines. However Wall Street was disappointed, given economists had forecast a 1.1% increase. Year on year, sales have grown by 1.3%, which is not the sort of number previously expected when oil prices began to tumble.
The fall in oil has led to eight straight months of declines in US wholesale prices but with oil having now stabilised, apparently, the PPI rose 0.2% in March both on the headline and on the core (ex food & energy). But again the number disappointed, given a 0.3% gain was forecast.
On the US earnings front, two big banks were in the frame last night. JP Morgan (Dow) posted a beat for a 1.6% gain while America’s biggest mortgage bank, Wells Fargo, posted its first dip in profits in eighteen quarters and saw its shares sag 0.7%. Johnson & Johnson (Dow) traded flat after posting a solid result undermined by the strong US dollar, while Intel reported a beat after the bell and its shares are up 3% in the aftermarket.
There’s a long earnings season row yet to hoe.
The retail sales result sent the Dow into an early dip in the session but earnings results helped to right the ship once more. Monday night’s trade saw the Dow rally before reversing so Wall Street is continuing to jog up and down on the spot, around 18,000 for the Dow, 2011 for the S&P and 5000 for the Nasdaq, until something new happens.
The retail sales result also sent investors piling into US bonds once more until the ten-year yield bounced off its previous low mark of 1.86%, closing down 3 basis points at 1.90%.
The US dollar index was also impacted, falling 0.7% to 98.78. This means the Aussie has recovered 0.5% to US$0.7626 after its earlier Chinese trade-related tumble. The weaker greenback did not help gold nonetheless, which is down US$6.30 to US$1192.00/oz.
Iran Appeals
The Iranian oil minister has called on OPEC to cut production by 5% when it next meets in June, thereby offsetting the impact of Iranian oil returning to the market assuming sanctions are lifted. As to whether Saudi Arabia is prepared to relent on its stance against excess North American production is another matter, particularly if it is at the behest of its arch enemy, but the Saudis, too, fear a flood of Iranian crude.
North American production is, nevertheless, expected to show a decline in May from April levels as the drop in US rig count finally starts to have an impact. Perhaps if the Saudis saw this as the US doing “the right thing” with regard the global oil market, Iran’s production cut request might just meet with reluctant approval.
Last night West Texas crude rose US$1.53 to US$53.57/bbl and Brent rose US91c to US$58.93/bbl.
Traders squared up last night on the LME ahead of today’s Chinese data releases. Tin recovered 1.5% and aluminium gained 1% while copper lost 0.7%.
And for a second day in a row, spot iron ore has posted a solid gain. Can we call the bottom yet? Analysts do not believe so, but we have retaken the 50 mark with a US$1.30 gain to US$50.10/t.
Today
The SPI Overnight closed up 8 points.
Around midday today we will see the release of China’s March quarter GDP, for which economists are forecasting 7.0% growth, along with industrial production, retail sales and fixed asset investment data for the month of March.
Locally, Westpac will release its April consumer confidence survey.
The ECB meets tonight for an update on QE while industrial production is tonight’s Fed-watch data point in the US, with the Fed Beige Book also due. More bank earnings will also hit the tape.
On the local stock front, Woodside Petroleum ((WPL)) will release its March quarter production report.
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