SPX sets a new record high as Ukraine fears recede and the USA publishes positive consumer data

Mar 5 • Morning Roll Call • 2939 Views • 1 Comment on SPX sets a new record high as Ukraine fears recede and the USA publishes positive consumer data

shutterstock_11022748The DJIA rose by the most this year on the day on Tuesday. The SPX finished the day at a record high as fears with regards to the Ukraine crisis subsided. From Europe we received the news that producer prices fell marginally in January versus December, the main reason was due to a fall in the input price of energy costs. In theory this should result in cheaper finished goods prices out of European manufacturers.

As the SPX rose to a record high, due to improved sentiment, a consumer confidence survey suggested that consumers in the USA are feeling more optimistic this month versus previous months. Critically, at 44.9, the index is now 0.5 above the reading in December 2007 before the USA economy entered recession courtesy of the banking collapse. This confidence is re-affirmed by the news that consumers in America are taking out record amounts of car credit with the average amount borrowed by car buyers last quarter climbing above $27,000 for the first time ever.

Keeping the economy moving in the USA appears to be one of the key objectives of the Obama administration, this was reinforced by the fact that President Barack Obama sent Congress a $3.9 trillion budget request with increased spending for employment, education and job training programs to boost the economy.

Industrial producer prices down by 0.3% in euro area

In January 2014, compared with December 2013, industrial producer prices fell by 0.3% in the euro area (EA18) and by 0.4% in the EU28, according to estimates from Eurostat, the statistical office of the European Union. In December 2013 prices increased by 0.2% in both zones. In January 2014, compared with January 2013, industrial producer prices decreased by 1.4% in the euro area and by 1.2% in the EU28. The 0.3% decrease in industrial producer prices in total industry in the euro area in January 2014, compared with December 2013, is due to falls of 1.4% in the energy sector.

US Consumer Confidence Edges Up In March

The IBD/TIPP Economic Optimism Index gained 0.2 points, or 0.4% in March, posting a reading of 45.1 vs. 44.9 in February. The index is 0.4 points above its 12-month average of 44.7, 0.7 points above its reading of 44.4 in December 2007 when the economy entered the recession, and 4.2 points below its all-time average of 49.3. Note: Index readings above 50 indicate optimism; below 50 indicate pessimism. The IBD/TIPP Economic Optimism Index has a good track record of foreshadowing the confidence indicators put out later each month by the University of Michigan and The Conference Board. IBD/TIPP conducted the national poll of 855 adults.

Obama Sends Congress $3.9 Trillion Budget to Boost Growth

President Barack Obama sent Congress a $3.9 trillion budget request with increased spending for employment, education and job training programs to boost the economy, financed partly by trimming tax breaks for upper-income families and some businesses. The sixth budget of Obama’s presidency, released eight months before the November midterm election, would enhance tax-credit programs for some families and childless workers and pump about $302 billion over four years into infrastructure projects such as roads and bridges. It would allocate $25 billion less for weapons and research than projected a year ago.

Americans borrowing record amount to buy cars

A combination of higher prices for new cars and relatively low rates for auto loans means Americans are borrowing a record amount to pay for their new rides. According to Experian Automotive, which tracks millions of auto loans written each quarter, the average amount borrowed by car buyers last quarter climbed above $27,000 for the first time ever.

Market overview at 10:00 PM UK time

The DJIA closed up 1.41%, SPX up 1.53%, NASDAQ up 1.75%. Euro STOXX closed up 2.70%, CAC up 2.45%. DAX up 2.46%, UK FTSE up 1.72%. Looking towards equity index futures the DJIA future is up 1.44%, SPX future up 1.55% and the NASDAQ future up 1.31%. DAX future is up 2.25%, CAC up 2.30% and the FTSE up 1.78%.

NYMEX WTI oil was down 1.55% on the day at $103.29 per barrel, NYMEX nat gas up 2.92% at $4.62 per therm. Gold on COMEX was down 1.12% at $1335.30 per ounce on the day with silver on COMEX down 0.29% at $21.18 per ounce.

Forex focus

The yen weakened 0.8 percent to 102.24 per dollar early evening in New York, the biggest decline since Jan. 14th. It appreciated to 101.20 yesterday, the strongest level since Feb. 5th. The yen fell 0.8 percent to 140.47 per euro. Europe’s shared currency was little changed at $1.3738.

The franc declined 0.5 percent to 1.21900 per euro, after reaching 1.21044 on Monday, the strongest level since Jan. 10th, 2013. To safeguard the economy from deflation and a recession, the Swiss National Bank, the Zurich-based central bank, set a cap of 1.20 per euro on the franc in September 2011. The yen declined the most in seven weeks versus the dollar as Russian President Vladimir Putin said there’s no immediate need to send troops to Ukraine, damping demand for safer assets.

Australia’s dollar gained 0.2 percent to 89.53 U.S. cents after sliding to as low as 88.91 Monday, a level not seen since Feb. 5th. The Reserve Bank left its benchmark interest rate unchanged at a record-low 2.5 percent to spur domestic industries and offset a slump in mining investment.

Bonds briefing

The U.S. 10-year yield rose 10 basis points, or 0.10 percentage point, to 2.70 percent late afternoon New York time, the largest gain on a closing basis since Nov. 8th. It dropped to 2.59 percent Monday, the lowest since Feb. 4th. The 2.75 percent note due in February 2024 fell 26/32, or $8.13 per $1,000 face amount, to 100 14/32. Treasuries fell, pushing yields on 10-year notes higher by the most since November, along with counterparts from developed nations, as signs the crisis in Ukraine is easing reduced demand for haven assets.

Germany’s 10-year yield rose five basis points, or 0.05 percentage point, to 1.60 percent late afternoon London time after dropping to 1.55 percent on Feb. 27th, the lowest since July 24th. The 1.75 percent bund due in February 2024 fell 0.435, or 3.45 euros per 1,000-euro ($1,374) face amount, to 101.385. Germany’s bonds declined, with 10-year yields rising from near the lowest in seven months, as tensions over Crimea eased after President Vladimir Putin said there was no immediate need to send Russian troops to Ukraine.

Fundamental policy decisions and high impact news events for March 5th

Wednesday sees the publication of Australia’s GDP QoQ expected in at 0.7%+, Spain’s services PMI is expected to come in at 55.3, Italy’s at 50.6, the UK’s at 58 and Europe’s final services PMI at 51.7. Retail sales for Europe are expected to be up 0.9%, with the revised quarter GDP at 0.3%.

From the USA we receive the ADP jobs report print expected to show a rise of 159K in jobs over the past month. Final services PMI for the USA should come in at 52.7. The ISM non-manufacturing PMI is expected in at 53.8. From Canada we get the statement from the central bank explaining the base rate decision expected to remain the same at 1.0%.

In the USA crude oil inventories are published as is the ‘beige book’. This analysis is used by the FOMC to help make their next decision on interest rates. However, it tends to produce a mild impact as the FOMC also receives 2 non-public books – the Green Book and the Blue Book – which are widely believed to be more influential to their rate decision. Anecdotal evidence supplied by the 12 Federal Reserve banks regarding local economic conditions in their district.
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