IG - Morning Thought and Opening Calls
IG - Morning Thought and Opening Calls
Overnight several key pieces if US data came out including core CPI figures (up to 0.3% versus 0.2% forecasted) and existing home sales, up to 4.92 million versus 4.89 million expected. Unemployment figures were poor, however up around 9,000 claims to 362,000. Considering the fire-engine red that was draped over every investor’s screens in Asian and Europe, the main piece of data that most have focused on in the US is the Philly Fed Manufacturing Index, which was a massive disappointment, registering a -12.5 contraction versus a forecasted expansion of 1.1. This has seen the US markets following the Asian and European sessions down, but it is no way near as strong as we experienced. Heading into the close the S&P 500 was off 0.66% to 1501 points as investors started to reread the Fed minutes with wiser eyes and saw that they were not as hawkish as reported and that most of the members calling for the early withdrawal are non-voting members and should settle ‘liquidity-dependent’ hedge funds.
Europe didn’t fare much better with its macro-economic releases, with French and German PMI figures out. There was a slight tale of two sectors here; manufacturing PMIs for both countries were in line and are normally the more influential figures, however services PMIs were down in both countries and that led the headline news in Europe. The figure also led the bears to do a merry dance, sending Europe stocks down with it.
Fears the region is ‘struggling’ to shake off its recession is a vexing one; we understand things are still strained and that most countries are just keeping their heads above water with regards to GDP, for example. However, ECB President Mario Draghi’s comments keep ringing in our ears. He has publically stated ‘he will do whatever it takes’ to stabilise the region. We know Mr Draghi has the OMTs in his back pocket if required and he hasn’t had to use them so far. We have already seen that the original LTRO loans are being repaid on time and in larger amounts than expected (next payment is due this weekend) plus sentiment in the area is improving. Bears are loving one-day headlines, and this is just that one-day headline.
This week saw earnings season hit full swing as cyclical stocks took centre stage, and it has been a mixed bag. BHP came out with an inline consensus report, however year-on-year it was off badly and coupled with the news it is to get a new CEO (internal promotion mind you) the stock promptly sold off, even with iron ore and petroleum (80% of EBIT) reporting record production levels and beating consensus. The sell-off looks set to continue today with BHP’s ADR pointing to a 1.6% dive this morning to $36.57 after being hammered in London overnight. Woodside also released strong numbers as Pluto finally turned profitable and with the sell-down at the Browse project reporting that net profit was strong. Stripping that out however, it was just an inline result. But, with guidance looking healthy and WPL having traded sideways for such a long time, it moved up (however it wasn’t spared yesterday) and has made reporting season very hard to call.
Moving to the open, we are calling the ASX 200 flat, down 1 point to 4979 (-0.02%). After such a violent reaction to rumours out of the US that a commodities hedge fund had to sell out of long positions - coupled with the statement from Chinese Premier Wen Jiabao that home prices ‘grew excessively fast’ - should ‘promptly’ have price restrictions imposed. The question becomes; was this the trigger for ‘the pullback we had to have’? The ASX was down but holding before Asia came online to drag it lower yesterday, and don’t be surprise to see this again today as investors cash out and look to come back in at slightly lower prices. It will be a very busy day again today as investors reassess positions and contemplate this question, however volumes are up and so is optimism, so watch for some green.
|Market||Price at 8:00am AEST||Change Since Australian Market Close||Percentage Change|
|US DOW (cash)||13869||-33||-0.24%|
|US S&P (cash)||1503.1||-6.5||-0.43%|
|UK FTSE (cash)||6297||-51||-0.80%|
|German DAX (cash)||7598||-89||-1.15%|
|Japan 225 (cash)||11263||-42||-0.37%|
|Rio Tinto Plc (London)||35.20||-1.27||-3.47%|
|BHP Billiton Plc (London)||20.98||-0.86||-3.94%|
|BHP Billiton Ltd. ADR (US) (AUD)||36.57||-0.60||-1.62%|
|US Light Crude Oil (April)||92.93||-1.43||-1.52%|
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