SCOREBOARD: Apple stew

US equities pulled back after tech giant Apple reported the slowest profit growth in almost a decade.

The US labour market, already positing a strong recovery, looks like it may be in store for another boost if recent jobless claims numbers are any guide. Claims fell to 330,000 (from 335,000, with the four-week moving average around 350,000) in the week to January 20, which was much weaker than the consensus for 355,000. Recall in the previous week there had been a sharp drop in claims, but the problem is that there are often seasonal adjustment problems this time of year and so it’s really quite difficult to get an accurate read. Was 335,000 just noise or what?

The great thing about this week’s claims is that it strengthens the case, or makes it more likely, that we have actually seen a sharp drop in jobless claims – to the lowest level in five years – with all the implications that holds.

So why didn’t stocks rally harder? Well they did initially. It wasn’t too long after the data that the S&P500 pushed through the 1,500 barrier – for the first time since 2007 – to be up a respectable 0.5 per cent. The offer came on when Apple shares slumped 11 per cent – the worst slump in four years – after reporting the slowest profit growth in about a decade and the weakest sales in almost four years. Fickle business tech. It seems this hit sentiment pretty hard through the market and it certainly pulled tech stocks down – the Nasdaq off 0.8 per cent, to 3127 as I write, with about an hour to trade. Otherwise, the S&P500 is just above zero, at 1495, while the Dow is more safely in the black, up 0.3 per cent to 13,821.

Generally though the world is still looking good, better what have you. Depending on how much weight you place on the PMI’s – I don’t place a lot – we’re starting to see these indicators turn up around the globe.

So it seems that HSBC’s flash estimate for China rose to 51.9 in January from 51.5 (a two-year high), while in the eurozone, the composite PMI rose to 48.2 from 47.2. The US PMI was two points higher (56) in January, although on the downside, the Kansas City Fed manufacturing Index slipped to -2 in January from -1. Now this is all good and well, but this is the problem with the PMI’s the way I see it. They mirror sentiment, so they don’t really tell us much. It’s not like global growth has turned around all of a sudden or the market has only just picked up – it’s being happening for a while now. These indicators are only just catching up.

Now despite all the good news on the data, commodities, apart from crude (which rose 0.8 per cent to $95.96 – apparently the market isn’t taking Australia’s oil glut seriously) were weaker. Gold fell $18 to $1668, while copper fell 0.3 per cent.

In price action elsewhere, the Australian dollar is down 55 pips to 1.0463, the euro is up 60 pips to 1.3372, British pound is off 40 pips to 1.5790, and yen pushed higher and sits just under 90 from 89.16. Then on the rates side, US Treasury yields were a bit higher, with the 10-year up 3bps to 1.85 per cent, the 5-year at 0.76 per cent, and the 2-year at 0.25 per cent.

Bits and pieces otherwise. In Europe, Spain’s unemployment rate hit a new record of 26 per cent – 5.97 million unemployed. With youth unemployment at 60 per cent. Finally, the Japanese trade deficit rose to a record of ¥6.93 trillion as exports fell 5.8 per cent and imports rose 1.9 per cent.

Looking at the day ahead, we see Japan’s inflation data at 1030 AEDT, but apart from that there isn’t much. The key piece of data tonight is the German IFO survey, although UK fourth quarter GDP is due as well. For the US, new home sales are out.

Have a great Australia Day and weekend…

Adam Carr is a leading market economist. See Business Spectator's glossary for definitions of technical terms used in SCOREBOARD articles.

@AdamCarrEcon on Twitter.

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