(WEDNESDAY 14TH MARCH - 07:46 - JAMES GERRISH)...The US MKT was SHARPLY HIGHER overnight with the DOW JONES up +217pts while the S&P 500 ADDED +1.81%. European mkts were HIGHER (FTSE up +1.07%, German DAX up +1.37%, French CAC up +1.72%) while locally, the SPI FUTURES mkt is pricing a HIGHER open up +43 pts when trading kicks off here this morning.
Yesterday, the ASX 200 closed up 50pts or +1.21% to 4247. Given the print on the FUTURES mkt this morning, we're likely to re-test the 4300 level again today.
OVERSEAS MKTS; A great night overseas with the US mkt breaking key resistance - the DOW closed at 13177 while the S&P 500 was at 1395 on (once again) better economic data from the US.
There were a number of very key points to take out of last nights session;
1. US retail sales posted their largest gain in five months even with the spike in the cost of energy pushing up petrol prices. What's encouraging about this data is it highlights that the improving economic fundamentals, particularly the strong employment growth that we're seeing, is being translated into higher spending activity. Its obvious that the US is building momentum and it suggests to me that the positive dynamics between jobs growth and spending activity could underpin a stronger economic recovery in the coming months.
2. The FED RESERVE finished their one day meeting and kept rates on hold (as expected) but gave no indication of further easing. They touched on the unemployment rate staying elevated at 8.3% but that was it - the message was essentially 'don't expect stimulus in the foreseeable future' given the economic situation is improving...
Could the US mkt be overcoming its insatiable appetite for stimulus (sugar hits) and be satisfied with a menu of better economic statistics?? That was the trend overnight and this saw GOLD sell off (-1%) given that the Fed is unlikely to print money any time soon (-ve for inflation) and the USD moved higher.
We highlighted the trend yesterday that the USD is moving higher on an improving economic situation, and is slowly loosening the shackles of being a safe haven currency. We're also seeing money come out of the US Treasuries (now yielding 2.12%) - which is a positive sign of risk appetite. - money moving from safe haven bonds into equities.
3. JP Morgan increased its dividend overnight and said they would buy back as much as $12 billion of its own stock this year in a significant show of confidence - "We expect to generate significant capital and deploy that capital to the benefit of our shareholders."
4. The mkt rallied overnight but the Aussie Dollar was pretty flat - its generally considered a 'risk on trade' which rallies when the mkt's rise and sells off when the mkt falls. The fact we actually saw the USD rally while the US equity mkt rallied - and the AUD was flat at the same time is an insight into a potential new trend that could be very bullish for our mkt.
If we accept the USD is now trading on the back of economic strength from the US, this suggests the Aussie could be under some pressure from here. If we see interest rate cuts, that will put additional pressure on the Aussie which has been a significant headwind for our mkt. So if we get a US mkt that rises combined with an Aussie Dollar that falls, our mkt could benefit from multiple tail winds.
I don't want to get too overly optimistic here, however the trends above look to be extremely positive. Throw in our belief that China will start to ease policy soon and its easy to get more bullish on the outlook for our stock mkt this year.
AUSSIE MKT; Higher open this morning and a retest of the 4300 resistance level looks likely. From a technical standpoint, out mkt still looks choppy/weak in comparison to the US and we need to break out of the current congestion zone before we get some clear air. The catalyst now for this to happen might be consolidation and possible weakness in the AUD amplified by an interest rate cut or two. That's what we really to see and this will prompt money sitting on deposit to re-enter the fray.
COMMODITIES; For a full list of overnight prices, CLICK HERE
AUSTRALIAN DUAL LISTED STOCKS
In New York, News Corp rose by US$0.49 to US$20.29, equivalent to A$19.23, A$0.35 above its last close on the ASX.
ResMed rose by US$0.86 to US$31.00, equivalent to A$2.94, A$0.06 above its last close on the ASX.
In London, Rio Tinto rose 82.5 pence to £35.33, A$1.23 higher in Australian currency terms.
BHP-Billiton rose 33.5 pence to £20.47, A$0.50 higher in Australian currency terms.
Henderson Group Plc rose 4.0 pence to £1.19, A$0.06 higher in Australian currency terms.
James Gerrish
