Daily Market Reports | Apr 15 2016
By Greg Peel
The Dow closed up 18 points or 0.1% while the S&P was flat at 2082 and the Nasdaq was flat.
Escape Velocity
Take what you will from yesterday’s local jobs lottery. A net 26,100 new jobs were added, more than forecast, and the unemployment rate fell to 5.7% from 5.8% on an unchanged participation rate. Sounds pretty encouraging, and the reason why the Aussie is up half a percent at US$0.7692.
The Aussie actually traded higher on the release, but closer inspection reveals 26,100 jobs represents the addition of 34,900 part-time jobs and the loss of 8,800 full-time jobs. This makes more sense, given high profile closures at the likes of Dick Smith and Masters along with Queensland nickel and any other resource sector business you’d like to name which should in theory be pushing the unemployment rate up, not down.
The definition of a part-time job is a minimum one hour’s work per week.
The jobs report probably gave a boost to the local consumer staples sector on the ASX yesterday, which posted a market-leading 2.6% gain. Otherwise, the supermarkets have been sold down heavily of late and thus it’s no surprise that in the “risk on” zone above 5000, “value” should be sought. Materials kicked on from Wednesday with another 2.3% gain while energy took a breather, and yet again the banks added most of the market cap clout to the index in rising 1.5%.
Once again the defensives were left on the sidelines.
Iron ore is the talk of the town this week, and the major reason behind strong rebound rallies in the big mining names. But you’d be hard pressed to find an analyst who does not believe the iron ore price will shortly come down again once the Chinese restocking phase swings seasonally into the destocking phase, sending prices back down from 60 to anywhere between 40 and 30, depending which analyst you choose.
It is likely investors were happy to again buy the banks yesterday on a lead from Wall Street, where JP Morgan set the scene for better than expected (or less worse) US bank results. Last night it was the turn of Bank of America and Wells Fargo.
Inflection
Both posted solid results, at least in the context. The US financials sector again led the indices higher last night but having already jumped in anticipation on Wednesday night, taking JP Morgan as a bellwether, upward moves were less dramatic. Citigroup reports tonight.
A little bit of squaring up in other sectors following two strong positive sessions ensured a quiet day on Wall Street and little net movement. Traders are watching the 2085 level in the S&P500. Break above that level and Wall Street has officially broken up out of the trading range it’s been stuck in now for many months. The S&P closed last night at 2082, basically unchanged.
As to whether Wall Street can indeed break to the upside or rather fall back down towards the bottom of the trading range (1810) once more, as it has done so many times of late, will depend on the avalanche of earnings numbers to come in the next couple of weeks. The banks have lifted the S&P to the inflection point and now it just depends on the numbers from other sectors.
The Fed debate has died down for now. Janet Yellen has made herself pretty clear, and last night’s March inflation data showed a lower than expected 0.1% gain for the CPI. And most of that was due to a higher oil price. Take out food and energy, and the core CPI also gained 0.1%, but fell back on its annual rate to 2.2% from 2.3% in February.
No reason to lock in a June Fed rate rise out of those numbers, although the Fed eschews CPI inflation data and prefers the PCE.
Commodities
Ahead of Doha on Sunday, oil prices were steady last night. West Texas is down a tad at US$41.45/bbl and Brent is down a tad at $43.88/bbl.
Base metal prices also consolidated last night after a couple of days of decent gains. Lead and zinc fell a percent and nickel rose half a percent, with other moves less significant.
More significant was a US$1.30 fall in the iron ore price to US$58.60/t.
The US dollar index also seems to found a new level for now, in this case lower. It’s up 0.1% at 94.91 and the gold bugs are again frustrated. Gold is down US$14.80 at US$1227.60/oz.
Today
The SPI Overnight closed up 14 points or 0.3%.
Today is that time in every quarter when the world tunes into Ripley’s Believe It Or Not, or as it’s otherwise known, China’s GDP result.
Month of March numbers for Chinese industrial production, retail sales and fixed asset investment will also be released.
Industrial production numbers will also be closely watched in the US.
And on Sunday, it’s Doha.
Rudi will skype-connect with Sky Business this morning, probably around 11.05am, to talk broker calls.
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