By Greg Peel
The Dow rose 127 points or 0.9% while the S&P gained 0.7% to 1683 and the Nasdaq, which has now moved past a 13-year high, added 0.5%.
Another day, another round of positive Chinese data, helping to boost spirits further on Bridge Street yesterday. China's industrial production grew 10.4% year on year in August, up from 9.7% in July and ahead of 9.9% expectation. Retail sales grew 13.4%, up from 13.2% and ahead of 13.2% expectation. Year to date fixed asset investment grew 20.3%, up from 20.1% and ahead of 20.2% expectation.
Also buoying the Australian stock market was the NAB business confidence survey for August, which showed a swing in the confidence index to a two-year high of plus 6, up from minus 3 in July. NAB put the swing down to an expected Coalition victory.
While the ASX 200 finished around 20 points higher, it was basically at this level all session having jumped from the bell. And that jump represented the strong Wall Street move overnight. Any perceived benefit of the Coalition victory is now baked in, and at 5200 the index is retesting the May post-GFC high. A break-up is required from here, and break-ups don't come easy. Weighing on index potential now is the rebound in the Aussie dollar.
The US dollar is stuck in a range at present, and was steady again last night at 81.82 on its index. By rights the greenback should be stronger on Fed tapering expectations, but with the data not so encouraging of late the "will it/won't it" debate rages on, or at the very least if the Fed does start tapering, the "by how much" debate rages on. Presumably we'll know more after the FOMC meeting next week, but in the meantime the greenback is going nowhere in a hurry.
This is leaving the Aussie exposed to the good news out of China, and those holding short Aussie positions on expectations of US dollar strength have been scrambling to cover. The Aussie is up another cent over 24 hours to US$0.9320, technically breaking out of its two-month range. The Dow is up another 127 points overnight, but can the ASX 200 push past the 5200 resistance area with any momentum?
Perhaps the Westpac consumer confidence survey, out today, will flip the coin. The SPI Overnight is certainly keen, closing up 29 points.
Just an FYI on the Dow, for those interested. At the close of trade on Wall Street last night Bank of America, Alcoa and Hewlett Packard were kicked off the team to allow Goldman Sachs, Visa and Nike to join the "top" 30. Note that the "top" 30 does not specifically relate only to market cap, but also is an attempted reflection of the general US economy, and as a price average the Dow is very much influenced by nominal share price values. That's why the cap-weighted S&P 500 is the go-to indicator for US stocks.
Last night's strength on Wall Street owed a nod to China, but was mostly to do with Syria. At 11am Sydney time the US president will go on national television to ask his fellow Americans to support the non-military solution offered up by Russia, being that the Assad regime hands over its chemical weapons to its ally. Last night France made the suggestion the Russian solution be taken to the UN for a vote, and polls suggest some 60% of Americans support a non-military outcome.
Of course, it's all for show. Assad has offered to comply despite denying ever using chemical weapons in the first place, nor even having any. If this is the outcome, no doubt Assad and Putin will have a good old giggle about it but the rest of the world really doesn't care at this stage. America certainly does not want another war and with tonight's fifth anniversary of 9/11 a stark reminder, does not want to stir up any more Islamic hatred.
Despite a steady US dollar, gold decided it was time to ditch the Syria-related geopolitical premium last night and fell US$22.60 to US$1364.20/oz. The brief spurt of US bond buying gave way to selling, with the ten-year yield up 6bps to 2.96%. The oils also continued to wipe off their risk premium, with Brent falling US$1.77 to US$111.46/bbl and West Texas falling US$2.19 to US$107.93/bbl.
Base metals have not shown much reaction since the Syria issue blew up and hence have not shown much reaction as it blows over. Nickel fell 2% last night but otherwise the metals are treading water, more interested to know what the Fed intends to do. Not even the strong Chinese data have managed to move the dial.
Spot iron ore rose by US40c or 0.3pct to US$135.20 a tonne.
As noted, the SPI overnight rose 29 points or 0.6%.
Rudi will appear on Sky Business this evening at 5.30pm and later travel to Chatswood to present in front of AIA members and investors. The title of his presentation is "The Big Confusion That Is The Share Market".
The Chatswood Club, 11 Help Street Chatswood
7.30pm Presentation and Q&A