Economic data out overnight wasn’t too bad. It wasn’t great, but there was sufficient evidence of underlying strength/improvement for punters to look through some of the more grim readings. The main one obviously is US jobless claims and while these only fell to 336,000 from 339,000, that stability is a message in itself. Around Christmas and New Year, seasonal adjustment problems can lead to wild swings in the series. That it’s hovered around the 336,000 to 339,000 mark for two weeks will do a lot to allay any concerns about a slowdown (an underlying slowdown amid some fairly treacherous weather).
The result also helps to soften the blow from data like the Philly Fed index which fell to -6.3 in February from 9.4 in January. It’s much easier to dismiss that slump as volatility when jobless claims remain low. The other news boosting sentiment was Facebook’s $US19 billion purchase of WhatsApp. There are great expectations for deal activity this year and Facebook’s move is firming up those expectations.
Wall Street had a decent session then, the S&P500 up 0.6 per cent (1839). The Dow is 102 points higher (16,142), while the Nasdaq is also up 0.6 per cent. Gains look to be reasonably broad-based, quite a few sectors up near the 1 per cent mark. The notable underperformer at this point is financials. Over in Europe, the Dax was down 0.4 per cent, the CaC was up 0.3 per cent and the FTSE100 also rose 0.3 per cent. Sluggish results – and notionally because of poor economic data, although truth be told it wasn’t bad at all. Sure, the manufacturing PMI fell marginally to 53 from 54, but it still shows manufacturing accelerating. More importantly, the services sector PMI rose – if just marginally to 51.7 from 51.7.
Rates had a decent move to the downside in the US. The 10-year yield rose about 5 bps to 2.76 per cent as investors continued to digest the Fed’s minutes yesterday. Recall that some committee members thought a rate hike sooner was better. The five-year is currently at 1.54 per cent and the two-year at 0.318 per cent. Aussie futures fell about five ticks a piece with the 10s at 95.865 and the threes at 96.96.
Forex markets were sedate, with the Australian dollar at 0.8991, clawing back about half a cent after an estimate (the ‘flash’ PMI) of Chinese industrial activity fell. The euro went the other way, losing about 40 pips to be at 1.3715. The European PMI had no discernable impact on the market – most of that fall occurred before the data came out. Otherwise, the British pound was 25 pips lower at 1.6654 and the yen rose to 102.35 from 101.98 (at 1630 AEDT).
Commodities didn’t share in the equity bid, although falls were generally modest. In the crude space, both Brent and WTI fell around 0.1 to 0.2 per cent – to $110.25 and $103.2 respectively. Gold then lost a couple of bucks to $1318, silver was 0.7 per cent weaker and copper was off 0.2 per cent.
Elsewhere, mortgage foreclosures fell in the US to 2.86 per cent in the December quarter from 3.08 per cent. Delinquent loans came in at 6.39 per cent, a slight drop from the 6.41 per cent rate in the third quarter. Still in the US, consumer prices rose by 0.1 per cent in January to be 1.6 per cent higher over the year, while a lower-tier manufacturing index in the US suggested activity accelerated in February to 56.7 from 53.7.
In markets today, the SPI suggests Aussie stocks will be up 0.8 per cent. In terms of the macro data flow there isn’t a lot for the Aussie market – nothing, actually – and the only other major data for our region are the minutes from the Bank of Japan meeting. Tonight we see UK retail sales data and existing home sales for the US, while the St Louis Fed President James Bullard gives another speech.
Have a great day…
Adam Carr is a leading market economist.
Follow @AdamCarrEcon on Twitter.