Scoreboard: Growth watch

Markets generally pushed higher on Friday and the S&P500 hit yet another record. I wouldn’t say there was any strong conviction behind the momentum though, which appeared listless at times. Perhaps that’s due to concerns over the crisis in the Ukraine. Russia has sent troops in and the talk is of war.

Data was generally positive notwithstanding the downgrade to US GDP on the back of lower estimates for consumption. At 2.4 per cent for the fourth quarter (was 3.2 per cent in the first estimate) growth isn’t at all bad and around trend. Moreover a modest rise in consumer confidence (81.6 in February according to Michigan Uni, from 81.2) and pending home sales (0.1 per cent in January) would have helped calm markets.

Wall Street saw the S&P500 push higher but only just. The index rose 0.3 per cent to 1859, while the Dow was 49 points higher (16,321) and the Nasdaq fell 0.3 per cent (4308). Over in Europe, the Dax rose 0.4 per cent, the CaC was flat, while the FTSE100 was 0.1 per cent higher. For our market today, the SPI suggests our stocks will rise a little today – up 0.4 per cent.

Forex saw the Australian dollar weaker, the unit losing some 70 pips to sit at 0.8896 US cents – in complete contrast to the euro, which rose 70 pips to be at 1.3769. The British pound is 50 pips higher at 1.6730 and the yen is at 101.4.

Commodities saw light action. In the metals space, copper put on 0.4 per cent although both gold ($2 to $1329) and silver (-0.2 per cent) were down. Crude then saw gains of 0.4 per cent on WTI ($102.7), while Brent was up 0.1 per cent ($108.7).

Rates saw the US 10-year yield hit a high of 2.69 per cent before falling back down to 2.64 per cent or little changed for the session (1 bps). The 5-year yield is then at 1.50 per cent and the 2-year at 0.32 per cent. Aussie futures were little changed down a tick or so. The tens are at 96.025 and the threes at 97.13.

Elsewhere, data in Europe was generally positive. German retail sales surged 2.5 per cent in January, UK house prices jumped 9.4 per cent over the year to February and the eurozone unemployment rate was steady at 12 per cent. Consumer prices picked up a little to 1 per cent year-on-year from 0.8 per cent. For China, the official manufacturing PMI suggests manufacturing activity was little changed in February, the index at 50.2 from 50.5.

In markets this week, it’s a very busy week for Australia. The Reserve Bank’s policy decision is due at 1430 AEDT on Tuesday and the market is unanimous in expecting no change. Perhaps of more importance will be the fourth-quarter GDP numbers on Wednesday (1130 AEDT). Last weeks’ slump in business investment raised fears to alarming levels and some of the more hysterical comments concern recession again – for the sixth year running! For what it’s worth, market economists expect fourth-quarter GDP to come in at 0.7 per cent for the quarter and 2.5 per cent for the year (according to a Bloomberg survey).

There is a plethora of data in the lead up to that as well. Company profits, net exports (Monday), public spending (Tuesday) – all over the next couple of days, which should give an even greater insight to growth in the quarter. Other key data out for the week include building approvals on Tuesday at 1130 AEDT and retail sales and the trade figures on Thursday, also at 1130 AEDT.

Looking abroad, it’s also busy. The potential for war in the Ukraine is obviously a key concern, but data wise, the key focus will be on the ISM index tonight and US payrolls on Friday. The market looks for 150,000 jobs to have been created in February, while the unemployment rate is forecast unchanged at 6.6 per cent. That’s the key stuff, but also of importance will be the Chinese non-manufacturing index today at 1200 AEDT and, later in the week, the Bank of England and European Central Bank rates decisions.

Have a great day…

Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.