Suddenly, a turnaround in market sentiment overnight, illustrating the increased volatility gripping financial markets.
A losing day for the US dollar, weak US retail sales and the positive result of the latest stress tests for big American banks saw Wall Street cap its strongest day in five weeks overnight.
As a result our market is heading for a small gain at the start of trading of 15 to 20 points. If that holds it will be the second positive day’s trading in a row this week.
After shedding more than 2.5% in the five previous trading days, Wall Street finished trading overnight with gains of 1.47% for the Dow, 1.2% for the S&P 500 and 0.9% for the Nasdaq.
The S&P 500 ended on 2,065.58, the Dow 17,890.53 and Nasadaq ended on 4,893.29. Both indices returned to positive territory after sliding more than 2.5 per cent over the previous five trading days.
The strength in sharemarkets overnight was mostly in the US as most European markets were easier (except London, which rose) as the thrill of the European Central Bank’s spending program started to wane, sending the euro higher.
Gold fell, despite the lower US dollar. It closed down a dollar at $US1,153 an ounce in New York.
The disappointing monthly retail sales for February gave investors hope that the Fed might not lift rates as soon as most think (a forlorn hope) and the financials sector was boosted by the stress test results which saw big US banks cleared to lift dividends and conduct buybacks with investors.
Headline sales fell 0.6% last month, a big surprise. But the core reading – which excludes food, gasoline station sales, cars and building materials – was flat, and revised lower in January.
While bad weather in the US northeast and Midwest in February was blamed for the sales weakness (online sales rose sharply) analysts noted that the core group measure had not risen in the past three months, pointing to weak underlying activity among consumers.
The rebound was helped by gains for cyclical and defensive industries, including consumer staple and discretionary companies, utilities, industrial and telecoms, as the dollar weakened.
It went back over $US1.06 to the euro after falling to close to $US1.05 the day before.
In fact the euro gained 0.6 per cent, reversing some of its Wednesday losses, to trade at $1.061. The Aussie dollar regained the 77 US cents mark overnight as well, up around a cent on the day.
Energy stocks fell in the US as oil prices fell (they should have really been buoyant with the dollar weaker).
Brent crude futures fell 0.6% to $US57.22 a barrel while US crude futures for West Texas Intermediate type oil,lost 2% to $US47.12, its lowest close to trading since late January.
In Australia yesterday, local investors seemingly anticipated the later rebound offshore and lifted the ASX 200 1% to 5,850.2, while the All Ordinaries index lifted 0.9% to 5816.
The big four banks led the way higher, with ANZ Banking Group climbing 1.2% to $35.64, the Commonwealth up 1.4% to $91.82, the NAB, up 1.2% to to $38.00 and Westpac added 1.6% to $38.09. So much for Goldman Sachs and other banks and brokers warning investors to get out of bank stocks.
