The market is up 77 recovering most of the 76-point fall yesterday. The Dow Jones was up 38 overnight. It was down 59 at worst and up 39 at best on lighter than average volumes. SFE Futures were up 32 this morning.
China’s Shanghai Composite index closed down 3.7% yesterday in response to a decision by regulators to tighten restrictions on housing finance. The CSI300 (another Chinese index) was down 4.6%, its biggest fall since November 2010.
Fed vice-chairman Janet Yellen expressed the view that the Fed should press on with its third quantitative easing program, while at the same time keeping an eye on inflationary expectations. The New York ISM index was up from 568.3 to 572.7 in February.
Best sectors — Consumer services (+1.0%), utilities (+0.9%) and financials (+0.8%). Worst sectors — energy (-0.3%) and industrials (-0.1%). European markets mixed — UK FTSE down 0.52%, German DAX down 0.21%, France up 0.27%, Spain up 0.72%, Italy down 0.85%.
Metals mixed – Copper up 0.29%, nickel down 0.79%, zinc down 1.11%, aluminium down 0.11%. Spot iron ore was down $1.80 to $148.80. Gold up 50c to $1572.80c. Oil down 57c to $90.11.
RBA meeting today. No one expecting a rate cut at this stage.
The AiG / CBA Performance of Services Index (PSI) rose 3.1 points to 48.5 in February. The services sector continued to fall in February, though there are signs recent interest rate cuts are providing a boost to the sector.
Government finance statistics — In the last result government spending fell in the September quarter by 2%.
The fourth-quarter 2012 current account deficit came in lower than expected at $14.7 billion, versus a consensus forecast of $15.3 billion.
Retail sales were up +0.9% in January double consensus forecast for a 0.3% rise. MYR is up on 3.6% on the back of this.
The new Chinese regime tightened measures to control a housing market bubble in some cities by upping deposit requirements (from 60% to 70% for second properties), increasing the mortgage rate, and unveiling a capital gains tax of up to 20% (from 1%) for some housing as they try to rein in investment in the property market.
The market has interpreted this as a sign that the new regime coming in this week is going to be more hawkish with some predictions that it will be more concerned about inflation than growth by the second half of this year.
Ex-JP Morgan Chinese economist Andy Xie forecasts iron ore price will fall to US$60 a ton and :a lot of shareholders in these highly leveraged miners will lose everything … In the end creditors will take over these projects.”
Rio’s chief economist also put up a slide at a presentation yesterday implying that Rioexpects the iron ore price to fall to US$100 a ton (over the next 18 months) and predicts the Chinese expansion will slow in the second half and inflation will rise.