In yesterday’s session on Wall Street, most stocks edged higher after the latest edition of the Federal Reserve minutes suggested it plans to keep interest rates low to safeguard the economic recovery.
Stocks had opened the session weaker on concerns the rally was getting overextended and the market was becoming too expensive, currently trading at 19 times the reported operating profits of its companies.
The technology-laden NASDAQ index was the biggest gainer, adding 0.3% while the S&P 500 index rose 0.2%. The Dow Jones Industrial Average finished flat for the session.
Once again, market sentiment has been boosted by the Fed reiterating its plan to keep rates low. Everyone knows unemployment is the key – it’s very difficult to start raising rates while unemployment is high. Yes, Friday’s non-farm payrolls was a step in the right direction but we are going to need to see plenty more of them before the Fed even begins to think about raising rates.
In Asia, regional markets are mixed following the US Fed’s minutes. The Hang Seng is the best performer, up 1.4% while the Nikkei is a modest 0.3% firmer. On the downside, the Kospi is weaker by 0.1% while the Shanghai Composite is down 0.3%.
In Australia, the ASX 200 is 0.2% higher at 4964.3 having traded to an earlier peak of 4971. While all sectors are in positive territory, the market is quite defensively positioned. It’s all about consolidating the break above the previous highs of 4955.
It is certainly positive to see the market breakout above the previous high, but the lack of volume and buying among the big cyclical stocks has made the breakout far from convincing. We feel there’ll be a short-term pullback before the market makes an assault on the 5000 point level.
It’s interesting and a positive to note that today’s gains aren’t coming from the usual blue-chip names. This bodes well for further gains and shows that there is broad-based buying across the market.
Tomorrow will see local economic data back in focus with the latest reading on the labour market. Expectations are for continued jobs creation and the unemployment rate to continue to gravitate down towards the 5% level by year’s end. This number will be a key determinant for future interest rate movements.
Europe is eyeing a mixed start to the session. Once again there is only a limited amount of fundamental data around for traders to work with, so the short-term outlook remains uncertain.
Looking ahead, Q4 final GDP figures from the Eurozone will stand out amongst economic readings from the trading bloc today, and can expect to be closely followed as this could slip back into negative territory, whilst there is also a raft of lower level numbers coming out of the EU, including PPI and German factory orders.
Earnings remain relatively quiet, but British Airways is due to unveil traffic figures for March which should capture the impact of last month’s strikes, whilst there have also been suggestions that cabin crews will announce the date of the next round of industrial action today.
Ahead of the open we’re calling the FTSE down 2 at 5778, the DAX up 11 at 6263 and the CAC down 3 at 4051.
