Morning Note - US higher despite Japan tragedy

by James Gerrish 14 March 2011

** 14/03/11  - 8.22am  -  by James Gerrish** 

  • The US market actually finished Friday's session higher despite the terrible news coming out of Japan. 
  • The DOW JONES added +59 points or +0.50% to close at 12044. The Broader S&P 500 was up +0.71% to close at 1304. 
 
  • The move came on the back of data that showed US February retail sales growing at their fastest pace in four months while the January number was also revised higher. 
  • Obviously the market’s attention is going to be focussed on the situation in Japan and the event is likely to prompt repatriation of funds from Asian economies back into the US and Europe.
  • It will be interesting to see how the USD performs given it remains in a clear downtrend and even with all this instability (Libya + Japan), we haven't seen a bounce. 
  • Bill Gross, the world’s biggest bond investor has just sold out of his entire holding of US Treasuries - this can’t be ignored and suggests that US Treasuries are no longer the safe haven they once were.
  • At the moment, the Federal Reserve is the biggest buyer in the market (about 70%) through the stimulus program and once this rolls up, we're likely to see a spike in yields as bonds fall - it seems that Gross is positioning for the wind back of stimulus. 
 
  • In relation to Japan, the Bank of Japan has moved quickly to try and stabilise the market flagging a significant stimulus program which is likely to help support asset prices in the short term. 
  • We know what the impact of US stimulus has been for equity markets and although this is a different situation - it is supportive for asset prices.
 
  • Locally, the Australian market has dropped 5.5% last week compared to a 3.5% drop in the US market. 
  • Looking at the charts (S&P/ASX 200 HERE and DOW JONES HERE) we see that our market looks weak while the US has retained its uptrend - for now at least. 
  • This can also be shown in an overlaid chart of the DOW and S&P/ASX 200
 
  • Locally, SPI FUTURES are indicating a rise of +8 points however I think this is a little optimistic  -  Dow Futures have just opened and are down -43 points.
 
  • Stocks trading overseas
 
  • In New York, News Corp rose by US$0.21 to US$17.95, equivalent to A$17.72, A$0.27 above its last close on the ASX.
  • ResMed rose by US$0.18 to US$31.14, equivalent to A$3.07, A$0.02 below its last close on the ASX.
  • In London, Rio Tinto rose 32.0 pence to £39.64, A$0.51 higher in Australian currency terms.
  • BHP-Billiton rose 16.5 pence to £23.17, A$0.26 higher in Australian currency terms.
  • Henderson Group Plc fell 1.3 pence to £1.61, A$0.02 lower in Australian currency terms

Disclaimer

James Gerrish is an Authorised Representative (Rep No. 352904) of Shaw Stockbroking Limited ("Shaw Stockbroking"). Shaw Stockbroking is a holder of Australian Financial Services Licence No 236048. Shaw Stockbroking, its directors, officers, associates and employees each declare that they, from time to time, may hold interests in financial products and/or earn brokerage, commission, fees or other benefits from financial products mentioned in this e-mail or attached documents. Unless specifically stated within this page or an attached document, any information communicated by this e-mail constitutes unsolicited general financial product advice which has been compiled without regard to any investor's individual objectives, financial situation or needs. It is not specific advice for any particular investor. Before making any decision about the information provided, you need to consider the appropriateness of this information having regard to your individual objectives, financial situation and needs and consult your adviser. Any indicative information and assumptions used here are summarised and also may change without notice to you, particularly if based on past performance or relate to a future matter.
 

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