Daily Market Reports | Jun 10 2015
By Greg Peel
The Dow closed down 2 points while the S&P was flat at 2080 and the Nasdaq lost 0.2%.
Confident?
Bridge Sreet opened hesitantly yesterday and appeared unsure as to what direction to take. The previous session had seen a flat close and evidence of bargain hunting in some sectors, but another jump in the US ten-year bond yield in the interim was always going to threaten the mood.
The mood did lift, nonetheless, on the morning’s economic data releases.
Total housing finance rose another 3.4% in April, split between a 2.7% increase for owner-occupiers and a 4.5% increase for investors. The good news is first home buyers made up 15.4% of owner occupier loans – a better figure than has been seen for some time – but the bad news is this is misleading. The number of first home loans actually fell 1.3%, meaning the 15.4% increase in the value of loans is all about runaway house prices.
The May rate cut will feature in next month’s set of numbers.
Business confidence rebounded in May, according to NAB’s monthly survey. NAB’s confidence index rose to plus 7 from plus 3 in April and the conditions index rose to plus 7 from plus 4.
Business confidence is an important driver of any economy, and the stock market saw the rebound as reason enough to start picking up some beaten down names. By late morning the ASX200 was up 25 points and it looked as though perhaps a bottom had finally been found following the five-session correction. However, the jump in confidence came as little surprise given the May rate cut and the small business stimulus measures in the federal budget.
And thus seemed not enough to stem the ebbing tide. The ASX200 turned around mid-session and headed south once again, effectively wiping out another 50 points from the day’s high to the low on close of down 27. Most sectors finished in the red, and those that didn’t, including telcos, closed flat.
The fat lady, it would seem, remains in the wings.
More Bond Selling
Wall Street is similarly finding it difficult to gain any traction at present. We may have to get through this month’s Fed policy meeting and out the other side – either with or without any confirmation of when the Fed might raise – before US stock markets can decide upon a direction.
There remains a deal of angst over the fact the Dow Transports average continues to weaken and has now marked a full 10% correction from its highs. One hundred year-old Dow Theory dictates that in order to confirm a bull market, both the Dow Industrials (“the Dow”) and the Dow Transports must rise together. Others argue that a hundred years ago is an awfully long time and, just possibly, things have changed a little since then. And indeed, the Transports raced well ahead of the Industrials earlier in the year on lower oil prices, and have corrected on the rebound in oil prices, which is a bit out of the norm for Dow Theory.
Greece is of course another concern and negotiations continue on that front, albeit it’s difficult to see how the two parties can reach any middle ground.
The major focus remains the sell-off in US bonds. Last night the US ten-year yield rose another 4 basis points to 2.42%, which was enough to ensure no great impetus to buy stocks at present. It’s funny how virtually everyone in the market was calling a rise in US rates a year ago, when yields were much higher, and now that they’re much lower but rising, everyone’s getting scared.
Again, this month’s Fed meeting will be a pivotal event.
Oil Spurt
Having come to terms with OPEC’s decision to hold quotas firm, oil traders suddenly decided to jump back into buying mode last night. With the US summer driving season shifting gear, it appears the cart is currently leading the horse as gasoline and other product prices head northward.
Expectations for reductions in crude inventories were also behind last night’s surge in oil prices. West Texas rose US$2.35 or 4% to US$60.61/bbl and Brent rose US$1.90 or 3% to US$64.65/bbl.
Base metals saw another flattish session, with price movements once again mixed and none greater than 1%.
Iron ore rose by US10c to US$63.90/t.
Gold was again steady, at US$1176.40/oz.
The US dollar index was also flat last night, hence the Aussie is little moved at US$0.7690.
Today
Westpac’s consumer confidence survey will follow hot on the heels of the business survey today. RBA governor Glenn Stevens will also make a speech at lunchtime, and as usual the market will be looking for any policy clues.
Rudi will appear on Sky Business’s Market Moves, 5.30-6pm and then later on he will host Your Money, Your Call – Equities from 8-9pm.
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