The recent positive tone in equities continued overnight with stock markets on both sides of the Atlantic posting good gains.
In London, solid retail sales data saw the FTSE add nearly 1% and that solid performance was mirrored by other European bourses. In America, more good earnings reports, nice data and some more market soothing balm from Ben Bernanke kept the positive tone through the day, after an initial positive open keying off Europe.
Looking at the data, UK Retail sales rose by 0.2% ex auto fuel, in line with the median forecast for a rise of 2.1%yoy (market expected 1.6%). This was noteworthy as the first time sales have risen for two months in a row since July 2012.
US data was headlined by a fall in the weekly layoffs data, jobless claims slipping back to 334K from a revised 358K. True, these figures are distorted by the annual auto plant retooling but the trend still is consistent with Payrolls gains of 120-200K per month. The Philly Fed index was also better than expected.
Earnings reports yesterday were again positive. Morgan Stanley was the big one last night and beat expectations mildly. That makes six out of six positive surprises for the four big banks and brokers, according to our credit analyst Ken Hanton. 82 firms of the S&P 500 have now reported with 65% of them reporting positive surprises, 13% in line and 21% negative.
Ben Bernanke’s comments to the Senate continued the more dovish tone, which seems to have been aimed at reversing the rise in US bond yields, which have been trending higher since early May. In this the Fed Chair has been successful. Clearly FOMC was getting worried that the backup in yields could damage the recovery. US 10-year yields have fallen by about 24bps since Ben Bernanke’s 10 July speech in Boston.
The US dollar was again mixed overnight, with gains against the Kiwi, Aussie and Yen. However, Canada, the Euro and the Scandis were up against the USD. Overall, the USD index rose by 0.2%.
Commodity prices again were firmer overnight, with energy prices the standout, oil up about 1.5% and Gas by 5.1%. The run up in copper prices since the beginning of July continued and, noteworthy for Australia, iron ore prices posted a 1.6% gain to $131.90 a tonne.
Today for the Australian dollar, after some selling pressure yesterday we expect a quieter day. Some bias to the upside, after the solid stock market performance of late and the rise in commodity prices.
Coming Up
After a very busy week, culminating with Fed Chair Bernanke’s testimony to Congress today is a lean day in terms of scheduled economic events. NZ has some data due on Net Migration early this morning, followed by Credit Card billings at 1.00pm AEST.
The only other scheduled events are the UK Public Sector Financial figures due this evening.
In the US, the reporting season continues with around 80 companies scheduled to report today, although most of them are not household names.
The calendar is fairly uninteresting out until the middle of next week when the Australian CPI is due plus China’s Flash HSBC Manufacturing PMI.
NAB