Scoreboard: American industry

Wall Street got a kick from industrials as well as the tech sector after a surge in US building permits and strong house price growth.

There was only a tentative move above 4000 in the previous session and at the close the index was just below. Last night however, the Nasdaq broke decisively above and sits at 4021 as I write – or up 0.7 per cent. Only 680 points to go! Actual stock specific news flow was light overnight and so there’s nothing really driving it. Just love – because that’s all you need.

Elsewhere gains were a bit more modest with the S&P500 up 0.3 per cent (1807) and the Dow 42 points higher to 16,114. Naturally, sector gains were strongest in tech, but industrials also did well following a surge in building permits. They spiked higher in both September and October, rising a cumulative 11 per cent. Indeed October’s 6 per cent gain is the strongest since June 2008. Annually, permits are 14 per cent higher (note that the actual number of housing starts wasn’t released and won’t be released till December 16). Similarly, house price growth remains strong and the S&P/Case-Shiller index suggests prices were up another 1 per cent in September to be 11 per cent higher annually.

The only really negative news came from US consumer confidence which fell in November and, naturally enough, that is getting a lot of press. The fall itself was modest though and doesn’t really signal new information. Why? Because confidence has been below average for some time and a fall from 72 to 70 is really neither here nor there. Anyway, it shouldn’t be a surprise that US citizens feel a little blue given the way that country is run (and by whom – lunatics).

That stronger data didn’t have any influence in the debt markets I should note, and the 10-year bond yield was down a further three or four bps to 2.7 per cent. Similarly, commodities are all weaker because stronger growth means, well, nothing in the commodity market – unless you still live under the illusion that fundamentals matter. So West Texas Intermediate was off 0.3 per cent to $93.84, Brent was flat ($110.9), copper fell 0.6 per cent and gold was flat at $1242. Otherwise the Australian dollar is lower at 0.9128 from 0.9183 and the euro, in contrast, is 40 pips higher at 1.3569. The yen is a little above target at 101.3.

There were a few other interesting tidbits of note. Mark Carney, the Canadian head of the Bank of England, said that he has some reservations about the quality of economic statistics produced in the UK. Carney is under fire from British MPs for creating uncertainty over the course of monetary policy and backing away from previously stated economic targets – which the BoE has certainly done. Guilty! But it’s a fair criticism of central bankers around the world.

So for instance the Fed’s economic targets are in truth not targets either. We know this because when it became clear the economy would meet these targets earlier than expected, they simply watered them down – just as the BoE has done.

Carneys’ concerns over economic statistics are more warranted though, and I have held my own concerns over the years about Australian Bureau of Statistics data being biased toward the downside, to reflect press reports or anecdote. Many of the adjustments that statisticians make to the data are highly qualitative after all – more art than science. Anyway, he suggested that ongoing weakness in business investment in the UK was at odds with other indicators.

For our market today there is a bit of data to note. Construction work done (1130 AEDT) is important although not market sensitive. Housing affordability statistics are also out for the third quarter. The key global dataflow includes the breakdown of GDP in the UK, while for the US we get initial jobless claims, durable god orders and a few other minor indicators (Michigan Uni consumer confidence, Chicago Fed national activity index, leading indicators).

Have a great day…

Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.

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