Scoreboard: Yellen respite

The S&P500 looks like it’s going to make another record today, brushing aside mixed economic data and perhaps focusing instead on comments Fed Chair Janet Yellen made to the US Senate. I mentioned some time ago that the Fed might use the weather-distorted data to take a break from tapering and prolong QE. We got some hints last night that this may be what Yellen intends. Specifically, she said that while “a number of data releases have pointed to softer spending than analysts had expected … that may reflect in part adverse weather conditions, but at this point it is difficult to discern exactly how much”.

Yellen also reiterated that policy wasn’t currently on a present course and a change in the outlook or certainty would or could change policy. It’s not a firm statement to delay tapering and there is no suggestion that tapering will end. Indeed she reiterated that QE will likely end later this year. But it’s a significant step closer to an announcement of a delay. It shows that Yellen at least is concerned and it may not take much to push them into some hiatus.

Wall Street pushed higher but the bid is easing into the close. At the high the S&P500 was up 0.5 per cent, but that’s more like 0.3 per cent with an hour or so to go. The Dow is up by a similar magnitude -- 50 points to 16,248 -- while the Nasdaq is 0.5 per cent higher (4313). By sector, industrials, basic materials and tech stocks outperformed, while on the downside were energy and utilities. Over in Europe, equities had bigger falls: the Dax dropped 0.8 per cent, the CaC was flat, while the FTSE100 was 0.2 per cent higher.

Forex action was most interesting in the Australian dollar. The unit has almost fully recovered after a slump following yesterday’s alarming capex numbers. As I write the currency is at 0.8963 US cents, having hit a low of 0.8905. The euro instead was up about 30 pips to 1.3713, the British pound is 20 pips higher at 1.6685 and the yen is at 102.05.

Commodities generally sold off but moves weren’t that big. In the metals space, copper and silver were down 0.2 per cent a piece, although gold was up smalls ($1329). Crude then saw falls of 0.4 per cent on Brent ($108.96), while WTI was down 0.2 per cent ($102.3).

Rates saw subdued price action despite Yellen’s comments. I would have thought to see a bigger rally but the US 10-year yield only fell a basis point to 2.65 per cent (2.63 per cent at the low). The five-year yield is then at 1.48 per cent and the two-year at 0.32 per cent. Aussie futures were little changed, with the tens at 95.965, and threes at 97.12.

Elsewhere, and getting back to that mixed economic data, US jobless claims picked up a little in the week to February 21, rising by 13,000 to 348,000. Similarly, durable goods orders look bad on the headline, falling 1 per cent -- although it has to be said that this was better than expectations for a fall of 1.7 per cent. However, core orders were 1.7 per cent higher, which far surpassed the expectation for a fall of 0.2 per cent. Other than that, German inflation slipped a bit in February to 1.2 per cent year from 1.3 per cent year-on-year, while the unemployment rate was steady at 6.8 per cent. Still in Europe, the eurozone business climate indicator improved in February, rising to 0.37 from 0.25.

In markets today, the SPI suggests our stocks will rise a little -- up 0.3 per cent. Data wise, the only release for Australia is the private sector credit numbers at 1130 AEDT. Otherwise, and looking abroad, the key regional data is probably Japanese inflation and employment data. Over to Europe we see German retail sales alongside eurozone employment and inflation data. Then for the US we see another US GDP estimate -- 2.5 per cent expected from 3.2 per cent for the fourth quarter -- and a few other releases (consumer confidence, pending home sales, and some regional Fed activity indexes).

Have a great day…

Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.