Daily Market Reports | Mar 09 2016
By Greg Peel
The Dow closed down 109 points or 0.6% while the S&P lost 1.1% to 1979 as the Nasdaq fell 1.3%.
Worst Since 2009
Yesterday’s Chinese trade data showed a 25.4% year on year fall in exports in February when economists had expected 12.5%. Imports fell 13.8% when 10.0% was forecast. The fall in exports is the steepest since 2009.
Suffice to say, the news was not well received in the Australian stock market. If nothing else, the bad news provided good enough reason for traders to take profits on resource sectors positions they’ve done rather well out of these past few sessions. Energy fell 1.1% and materials 0.8%, while the banks, which have also been rallying strongly, joined in with a 1.0% fall.
Of course, as is the case every year, we can point to the Lunar New Year disruption when it comes to the Chinese numbers. Beijing does not smooth its data to account for the one week break, which this year happened to be early in the solar calendar. But that is not to suggest the numbers would have looked at all healthy if so adjusted.
It is of no great surprise the ASX200 saw a pullback yesterday after having powered back from around 4800 to pass through 5000 yet again, and almost to 5200. The news did not get much better overnight.
Meanwhile, if there is anything troubling the Australian business community at present you’d never know it. Yesterday’s NAB business confidence survey for February showed a jump in the confidence index to 3.4 from 2.5 in January and a surge in the conditions index to 8.3 from 5.4.
Commodities
Last night both Goldman Sachs and Citi issued reports suggesting the market is kidding itself if it believes there is a balance returning to oil and metal markets. The short-covering rallies witnessed on oil markets and on the LME will prove but a false dawn, they suggest, as was the case last year.
While there have been some positive signs of a reduction in US crude output, tonight’s weekly inventory numbers are forecast to show another big jump in stockpiles. Meanwhile, more OPEC chatter flowed last night, with Kuwait’s oil minister declaring Kuwait would only freeze production if Iran did. Iran’s not going to, so that’s that.
West Texas crude is down US$1.69 or 4.5% at US$36.24/bbl and Brent is down US$1.33 or 3.4% at US$39.45/bbl.
Base metal prices had already appeared to be overcooked heading into yesterday’s Chinese data and last night’s investment bank analysis. Aluminium, copper and lead fell 2%, last night, zinc fell 3%, tin 5% and nickel 8%.
So what’s going on in iron ore? It’s up another US70c at US$63.30/t.
The US dollar index is up 0.1% at 97.19 and gold is down US$5.90 at US$1260.10/oz.
The Aussie has retreated on the Chinese data. It’s down 0.5% at US$74.36.
Resistance
The Australian market had a good run of it lately so profit-taking was no surprise yesterday. The Dow and S&P500 recently hit psychological levels of 17,000 and 2000 respectively so they, too, were due some consolidation.
A fall in the oil price is always a good excuse for Wall Street to follow suit, and so it did last night. The combination of weak Chinese data and the Goldman and Citi reports had US traders similarly bailing out of the energy and materials sectors and back into defensives, and also back into bonds. The US ten-year yield fell 7 basis points to 1.83.
It’s a week largely devoid of US economic data releases so Fed-talk has been off the table this week, allowing markets to concentrate on the commodities story. But tonight the ECB will hold a policy meeting and the expectation is Mario Draghi will announce some further extension to stimulus.
So the market has also readied itself in case of disappointment.
Today
The SPI Overnight down 26 points or 0.5%.
Westpac will release its monthly consumer confidence survey today and local housing finance numbers are due.
There is another solid block of stocks going ex-div today.
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