CMC Markets Weekly Report - 5th March 2012
Stocks in the U.S eased off their lows but still failed to close in positive territory on Friday, as gains were limited following a robust rally in recent weeks and no major news on the economic front gave investors little reason to jump in.
The Dow Jones Industrial Average slipped 2.73 points, or 0.02 percent to close at 12,977.57, whilst the S&P500 fell 4.47 points, or 0.33 percent, to end at 1,369.62. The Nasdaq declined 12.78 points, or 0.43 percent, to finish at 2,976.19.
Oil prices eased from Thursday’s 11-month high following news the reports of a Saudi pipeline explosion were said to be false, easing fears of supply disruption.
The US dollar was strong again on Friday, marking a week of strength as the relief of the Greek bail-out and the LTRO gave way to cold hard reality once more. On Friday it was Spain's turn to rock the boat with as the government increased its expected 2012 budget deficit to GDP ratio to 5.8% from an earlier hoped for 4.4%.
There remains much talk that the European crisis is far from over. Spanish and Italian bond yields are still behaving themselves with help from the LTRO but the focus has now shifted to Portugal, where economists have begun to assume a second troika bail-out package and a bondholder haircut will be needed, while Greece refuses to go away, with suggestions around that the second bail-out package and haircut it just secured will still not be enough.
The euro was also not helped by a weak January retail sales result out of Germany on Friday night and ultimately the US dollar index rose 0.7% to 79.41. Gold thus slipped back US$12.60 to US$1711.80/oz and the Aussie has fallen 0.6% to US$1.0730.
Base metals had closed on Thursday night before the rumours of the Saudi pipeline explosion prevailed so Friday night's moves were minimal, although aluminium fell 1.5%.
On Saturday Beijing announced a sudden steep fall in China's non-manufacturing (services and construction) activity in February as the PMI fell to 48.4 from 52.9 in January. It is the first drop in this PMI in three months. However, local economists were quick to point out that February numbers are often distorted by the impact of the Chinese New Year festival. Today HSBC will release its independently calculated measure.
Australia will also see its services PMI out today and construction on Wednesday. Today also brings the monthly ANZ job ads series and TD Securities inflation gauge. Counting down to the December quarter GDP result on Wednesday we'll see quarterly company profits and inventories today and the current account, including terms of trade, tomorrow.
The RBA will make a rate decision tomorrow and is expected to remain on hold once more with the Greek bail-out having been settled since the previous meeting. ABARES will provide a commodity report for the March quarter. Following Wednesday's GDP we'll see February unemployment on Thursday and the January trade balance on Friday.
The eurozone, UK and US will also all report services PMIs tonight. It's a quiet week economically for the US although it is employment week, with the ADP private sector report out on Wednesday and the official non-farm payrolls number on Friday. The US unemployment rate is expected to remain steady at 8.3%. Factory orders tonight, consumer credit on Wednesday and the trade balance on Friday make up the numbers.
The RBNZ, ECB and Bank of England will all make rate decisions on Thursday and in the case of the ECB and BoE, no change is expected.
Friday will see a monthly data dump from China, which includes February retail sales, industrial production and inflation data.