Scoreboard: Homes fire

Wall Street rebounded overnight, helped by good news on US house prices and strong corporate earnings. Emerging market fears subsided.

Global stocks rebounded overnight, maybe not enough to offset the losses of the prior two sessions, but it’s a start. At least it’s not another sell-off. Obviously there’s been an abatement of this whole emerging market rout, for now, although for how long is anyone’s guess.

US economic news and corporate earnings appear to have driven the market’s gains, along with said lessening in emerging market fears. The economic news wasn’t all great mind you – in the United States, durable goods orders fell by nearly 5 per cent or so in December ( 1.8 per cent expected). However it is a very volatile series and core orders, which strip out some of this volatility, were basically flat after a strong gain the month prior.

So not all bad, and this allowed the market to focus on other data prints also out: US house prices are surging and November saw the strongest gains since 2006 (up 13.7 per cent for the biggest 20 cities). Consumer confidence increased as well, rising to 80.7 in January from 77.5. As for earnings, they were generally good, with some of the more notable results from Ford (90 per cent lift in fourth quarter net income), Pfizer and Du Pont.

Wall Street had a decent run, with the S&P500 up 0.6 per cent (1791) with about an hour left to trade. The Dow was up 86 points (15,924), while the Nasdaq was 0.2 per cent higher (4090). The latter was weighed down by a 7 per cent fall in Apple after reporting decent profit results but disappointing iPhone sales. Health care and financials look to have outperformed at this stage.

Commodities were mixed, with gold off $12 to $1251, silver falling 1.4 per cent and copper down 0.2 per cent. Crude had a decent session, up 0.5 per cent on Brent ($107.48) and up 1.7 per cent on WTI ($97.39).

Forex was fairly uneventful. The Australian dollar is little changed at 0.8779 and the euro is only about 20 pips lower to 1.3658. Perhaps the biggest surprise was that the British Pound was weaker – just – despite data out overnight showing another quarter of robust growth in the United Kingdom. GDP expanded by 0.7 per cent, in the December quarter to be 2.8 per cent higher annually – the best growth since 2007. That’s worth a bit of a rally, right?

Rates were just as boring, with the US 10-year bond yield virtually unchanged at 2.76 per cent.

Elsewhere, the Indian central bank raised its cash rate 25 bps to 8 per cent to combat inflation and Turkey’s central bank hinted it may do the same. US President Barack Obama raised the minimum wage for federal employees by nearly 40 per cent.

In markets today, the SPI is flat at the time of writing, although with banks and resource stocks up around the globe this appears to be anomalous. Event-wise the key will be the US Federal Reserve meeting (announcement at 0600 AEDT). Most look for another $US10 billion taper which would bring monthly purchases to $US65 billion per month. Outside of that, there are no major releases for Australia. In the UK we see house price data – likely surging – and then for Europe there isn’t much either – money supply growth.

Have a great day…

Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.

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