SCOREBOARD: Bang-up job

Falling US jobless claims cheered Wall Street with evidence of a solid labour market recovery.

The good economic news flow continued overnight, at least for the US, with another drop in jobless claims providing further evidence of a solid recovery in the labour market. Claims fell to 351,000 in the week to March 10 from 361,000, while continuing claims fell about 70,000 to 3.34 million, which is the lowest in about four years. That number was then backed by small increases in both the Empire State manufacturing index (20.21 in March from 19.53 and an average of 10) and the Philly Fed index (12.5 from 10.2 and an average of 4.4).

It’s all good news so far for the US and equities consequently pushed higher. At close, the S&P was up 0.59 per cent (1402), with financials, industrials and basic materials the key outperformers. The Dow was 0.44 per cent higher (13252), the Nasdaq was up 0.51 per cent (3056), while earlier the SPI had risen 0.4 per cent (4308). All good stuff and a reasonably straight forward session.

Now one of the more interesting tidbits out last night involved crude. There was a rumour flying around that the UK PM David Cameron and President Obama had agreed to release oil out of their respective national reserves. WTI and Brent both fell about $2 on the news, but subsequently retraced most of that after Cameron said a decision hadn’t been reached. They did discuss it though and probably a whole bunch of other prices they didn’t like. Like bond prices – printing press and a bit of PR can help here and indeed there was a reasonably decent rally from 1630 (AEDT). The 10-year treasury yield for instance fell 6 basis points to 2.27 per cent and the 5-year was down 7 basis points to 1.09 per cent. The 2-year yield then fell 4 basis points to 0.36 per cent and Aussie futures followed suit – the 3s and the 10s up 3 ticks a piece to 96.22 and 95.715.

Then there is copper ( 1.3 per cent last night), cotton sugar, meat and wheat – the list of prices not to like goes on. So far then we’ve just seen a bit of jawboning on the crude reserve front – the ‘rumour’ leaked from one or both of the political offices. But unless sentiment takes a turn, then I suspect a release of crude is only a matter of time. And Israel hasn’t even attacked Iran yet. Think about it. Brent is trading at $123 (-1 per cent overnight) and WTI at $105 (down -0.1 per cent) and that’s with global output well below potential. As the economy turns out of this ‘slump’, there is only one way for crude to go I would have thought, even with all the news about just how much of the stuff the US has got now – a glut apparently what with all shale reserves they’ve got.

Price action elsewhere saw the Australian dollar push up about 90 pipis to 1.0537, euro rose 60 pips to 1.3087, while sterling was up 66 pips to (1.5716). Gold was then $15 higher to $1658.

That’s pretty much it. US producer prices were the only other major data release out. Prices rose 0.4 per cent in February to be 3.3 per cent higher annually. Core prices are 3 per cent higher annually and rose 0.2 per cent in the month. Both headline and core came in broadly as expected.

Very little out today, but tonight we see a few data pieces out of the US. Consumer prices and industrial production for February and then the Michigan University’s preliminary estimate of March consumer confidence.

Adam Carr is senior economist at ICAP Australia. See Business Spectator's glossary for definitions of technical terms used in SCOREBOARD articles.

Follow @AdamCarrEcon on Twitter.

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