Wall Street ended April with something of a bang, hitting a series of intraday highs on the Dow and the S&P 500 this morning in the wake of the Fed’s decision to continue cutting its huge spending program.
The Dow closed at a record 16,580.84, to be up 0.3% on the day and 0.75% in April. It was the first record close for the Dow this year.
And the S&P 500 rose 0.6% in the month after finishing at 1,883.95 and is now less than 10 points off its all time high.
Nasdaq rose 11 points to 4,114.56, but lost 2% thanks to the weakness in techs and biotechs in particular.
In contrast the Aussie market was up a stronger 1.8% last month.
Clearly many of the weak days resulting from sell offs on wall Street meant nothing here.
But with the ANZ starting the first big bank reporting season of the year today, our market’s strength might not last.
Gold rose in April, oil fell and copper was all but steady.
The solid end to a volatile day’s trading in New York will help the Aussie market to open on a positive note this morning with a gain of around 18 points on the share futures.
But that will be tested by the release of the two monthly surveys of Chinese manufacturing later today.
The Aussie dollar topped the 93 US briefly in trading overnight and was around 92.90 in early Asian dealings this morning. It gained 0.6 of a cent in April.
The Fed’s tapering decision was expected, as was its upgrading of the language describing the current state of the economy which was more positive about recent events than about what happened earlier in the March quarter.
The Fed’s move overcame the shock of a sharp slowdown in the economy in the first quarter, with the first estimate of GDP growth showing a rise of a mere 0.1% in the three months to March, compared to market forecasts of a 1.2% gain.
That’s an annual rate, and came after December quarter growth of 2.6% (annual) – so it was a sharp slowdown and blamed on the severe winter weather which saw parts of the US northeast and Midwest experience some of the coldest weather on record.
The Fed statement though also pointed to signs of the impact of the cold winter having ended and higher spending emerging in households.
The first estimate for the March quarter leaves the Fed’s forecast for 2014 growth of 2.9% looking a bit excessive, but that will depend on the size of the revisions in the second and third estimates, and in the strength of the rebound in the current and September quarters.
But the March quarter will be weak after all the revisions, and that means that nearly five years since the start of the current rebound from the lows of the GFC, the US economy is still struggling to gain traction.
As expected, the Fed tapered its asset purchases by a further $US10 billion a month to $US45 billion.
The unanimous decision didn’t startle markets, which dipped slightly and then recovered their poise to post new highs.
ASX200 vs US Markets – Local market outperforms as Fed tapers
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The post meeting statement from the Fed statement said the activity data have “picked up recently”, in contrast to the March meeting, at which time many of the key numbers were depressed by “adverse weather conditions” (that’s the severe winter). It said household spending was ‘rising more quickly’.
The Fed’s assessment of housing was unchanged – the recovery remains “slow” – and recent data suggests it remains that way. But the continued tapering makes it clear that the Fed does not view ever-increasing home sales as a necessary condition for the ending of its quantitative easing and reducing unemployment.
The April jobs report on Friday night, pour time, will be the next big test for the US economy – around 200,000 to 210,000 new jobs is the market forecast and an unemployment rate of 6.6%.
Comex gold prices eased to just under $US1,296 an ounce in New York, for a gain of around one per cent for April, but silver eased to end at $US19.17 an ounce on Comex, a loss of almost 3% for the month.
Comex copper futures rose by just on 0.1% for the month, and all of that rise and more came overnight with a 1.5% jump in the settlement price to $US3.03 a pound.
New York oil futures prices shed around 1.7% in April and closed just under $US100 a barrel thanks to soaring supplies of American produced crude oil. Brent crude oil in London also fell by around 1.7% for the month.
In Europe the Stoxx 600 index fell 0.1 overnight to trim its monthly gain to 1.1%. Germany’s Dax rose 0.6% last month.
In Australia, the ASX 200 added 2.5 points yesterday to be up 1.8% for the month, a much more solid rise than many other markets. The All Ords added 1.3%. The Australian market is up 2.5% after the first four months of the year – a year ago it was up close to 12%.
Elsewhere in Asia, the MSCI Asia Pacific Index lost around 0.6% last month and Hong Kong’s Hang Seng index was down around 1.2% ( and around 3.7% so far in 2014 because of concerns about the strength of the Chinese economy).
