By Rudi Filapek-Vandyck, Editor FNArena
The S&P500 managed to eke out a gain overnight of a full 0.29 point to close at 1472.63 (don't ask for a percentage change, it hardly registers on any scale of sanity). The Dow Industrials remained 23.66 in the negative (13511.23), largely on selling pressure for major component Boeing , while a recovery in Apple shares pushed up the Nasdaq a whole 6.77 points to 3117.54 (up 0.22%).
Yes, it was again a day full of fireworks..... NOT!
Some observers were a bit worried on Tuesday that Ben Bernanke's public appearance might indicate the Federal Reserve is looking to abandon its ultra-monetary stance later into calendar 2013. But if the latest read on consumer inflation can be taken as a guide, those observers shouldn't worry just yet as America's CPI is still moving at subdued pace. In fact, December's modest 0.1% rise in core inflation -the fifth such increase in the past six months- can easily be used as a justification for keeping monetary stimulus going for longer. The headline number was flat (0.00%) further reinforcing the Fed's argument. Annual inflation in the US remains at 2%.
The Fed Beige book signalled minor, gradual improvements in about all regions and segments of the US economy. Nothing we didn't already know from recent economic data and indicators. Key words in the state of the US economy remain "moderate" and "modest" and the latest Beige Book printed both terms in abundance. December's industrial production figure showed a gain of 0.3% and was smack bang in line with consensus expectations. An index of sentiment among home builders came out below expectations.
On a global scale, the World Bank lowered its growth prognostication to 2.4% for 2013, down from the previous 3% estimated in June last year. The main culprit was Europe, where growth is now expected to print minus 0.1% this year instead of the earlier positive estimate of 0.7% for the troubled zone.
In corporate news, JP Morgan CEO Jamie Dimon did the honourable thing and had his pay cut in half to take responsibility for last year's "Whale" trading loss of US$6bn. He's still the highest paid CEO on Wall Street. Go figure. Both JP Morgan and Goldman Sachs released their quarterly performances last night and both beat market expectations, putting a positive bias under the share prices of US financials. Whether it's time to genuinely get excited about US financials remains a matter of contention. JP Morgan and Goldman Sachs are arguably the better ones in the sector. Northern Trust and Bank of New York Mellon also reported overnight and both disappointed, putting downward pressure on their shares.
Shares in Goldman Sachs apparently set a new high today. The star performer on the day in the sector was Genworth Financial, which while under threat of being de-rated to junk status, announced a corporate restructuring and saw its shares shoot 9% higher.
Aircraft maker Boeing was under pressure the whole day after Japanese airlines grounded their fleet following a Dreamliner incident in Boston. In the tech sector it was "opposite day", with recent star performer Dell retreating after some hefty gains earlier this week and Apple reversing the trend of weakness seen over the previous two days.
In Europe, Spain once again reiterated there will be no need for a bailout (nothing new there). European bourses in general provided little direction.
Contrary to all speculation about one direction only this year for US treasuries, bond prices actually rose overnight (yields lower). Economic data met expectations and the Federal Reserve reportedly bought US$1.474 billion in Treasury coupons maturing from February 2036 through November 2042. US 2yr yields fell 1pt to 0.249% and US 10yr yields fell by 2pts to 1.825%. According to the latest update on funds flows, central banks in India and China remain active buyers of US debt.
In foreign exchange markets, Kathy Lien reports "deleveraging and profit taking" dominated the day with Japanese government officials indicating a rapid weakening of the yen can be as dangerous as an expensive currency for the Japanese economy.
All in all, the US dollar largely traded sideways against major currencies in European and US trade on Wednesday. The Euro held between US$1.3255 and US$1.3325 and was near US$1.3290 in afternoon US trade. The AUD held between US105.30c and US105.70c and was near US105.65c in afternoon US trade. And the JPY eased from 87.79 per US dollar to JPY88.66, and was trading at JPY88.51 late in the US session.
Metals in London showed little movement. Crude oil prices booked small gains on the back of a positive read on US inventories. Gold barely budged despite all the excitement among gold bugs across all the continents about the Germans repatriating their gold from US vaults. Not so in iron ore: China Fe62% spot iron ore price fell by US$7.50 to US$145.40 a tonne yesterday, that's a loss of 4.9% in one day. As the share market had already grown sceptical in recent sessions, it remains yet to be seen how much pressure this will exert on share prices for pure play equities in today's session in Australia.
On the day's calendar today are unemployment data for Australia (no longer representative but we'll work with whatever we have at hand), while later in the US, data on weekly claims for unemployment insurance will be released together with housing starts and the Philadelphia Fed index.
Contrary to earlier reports, I will NOT be on Sky Business today.
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