Scoreboard: More than a feeling

Commentators have been keen to accentuate the positive on US GDP, while America’s strong corporate earnings also helped drive global stocks higher.

The most remarkable thing about last night wasn’t the US GDP result, although it was solid and it was one factor that saw equities push higher last night. Indeed at 3.2 per cent for the 4th quarter, the result was pretty much expected. In fact it is down from the 4.1 per cent that was reported in the 3rd quarter. What’s remarkable about this particular release is the way it’s being reported.

Gone are any references to growth being weak, especially the usual attempts at turning something strong into something weak. Gone are the protestations that ‘it cannot last’! And gone are the references to one-off drivers. When you adjust for those PR factors, this result ‘feels like’ the strongest result in about a decade, such is the spin around the figure. It is in fact only the strongest two-quarter result in a couple of years; we’ve had results like this about five times since 2010. It is nothing new. But the change in PR is very welcome. As for the result, most of it was driven by consumer spending (2.3 per cent of the 3.1 per cent rise) and net exports (1.3 per cent of the 3.1 per cent rise). Government knocked off about 1 per cent from growth.

Global stocks generally pushed higher, especially on Wall St. That GDP figure helped as did strong stocks performances for Google, Facebook and Visa, with the latter two stocks on good earnings results.  With about an hour left to trade, the S&P500 is up 1.2 per cent (1795), the Dow is 101pts higher (15839), and the Nasdaq is nearly 2 per cent higher (4130). Stocks in Europe underperformed with the Dax up 0.4 per cent, the CaC 0.6 per cent higher, while the FTSE100 fell 0.1 per cent.

Rates sold off only a little, despite the GDP result with the yield on the US 10-year note up 2 basis points at the time of writing to 2.7 per cent (2.72 per cent at the high). The 5-year note is at 1.52 per cent, while the 2yr is at 0.36 per cent. Aussie debt futures were off 4 and 3 ticks respectively on the 3s (97.11) and 10s (96.030).

Commodities had a mixed session with gold down over $18 to $1244, and silver fell almost 2 per cent. Copper was then off 0.4 per cent although crude pushed higher, partly on the GDP result and partly on a cold snap hitting the US. WTI was 0.7 per cent higher at $98.06 and Brent was 0.2 per cent higher ($107.9).

Forex markets drove the Australian dollar higher, about 50 pips to 0.8782 which is still well into oversold territory. But the big mover overnight was euro, which fell almost a big figure to 1.3551. Generalised US dollar strength is the issue here after the GDP result, and the dollar index was about 0.6 per cent higher at the time of writing. Elsewhere we saw the British pound down over 70 pips to 1.6479, while Japanese yen is at 102.68.  

Elsewhere US data wasn’t that crash hot, but clearly markets ignored the volatility for once. Or rather the headlines did. US jobless claims rose by about 20,000 in the week to January 25 although the numbers are probably still being hit by problems with seasonals (or adjusting for them). Pending home sales fell almost 9 per cent in December following a 0.3 per cent fall the month prior.  In Europe, the news flow was a little more upbeat. The German unemployment rate slipped to 6.8 per cent in January from 6.9 per cent, while inflation was steady at 1.2 per cent year-on-year. The European business climate indicator was largely steady at 0.19 in January (from 0.2).

In markets today, the SPI suggests our market lift a modest 0.4 per cent. We will see a run of data from Japan around 1030, including CPI and industrial production. Then at 1130, the Reserve Bank releases credit data for December. This evening we see German retail sales, then European unemployment and inflation data.  For the US, we get the monthly personal income and spending figures, a couple of regional PMIs and the final estimate of Michigan Uni’s consumer confidence measure. The official Chinese manufacturing PMI is due sometime over the weekend.

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