Daily Market Update
11/03/10 - 16:00
Anthony Grech, Research Analyst, IG Markets
Wall Street opened in negative territory today following a smaller-than-expected drop in initial jobless claims. Chinese policy-tightening speculation also weighed on stock market appetite today.
By 3.40pm (London time) the Dow Jones Industrial Average was trading 18.29 points (-0.17%) lower at 10549.04 while the broader S&P 500 was 2.64 points (-0.21%) below its previous close at 1143.25.
Shares of mining companies Freeport-McMoRan Copper & Gold and Southern Copper fell between 0.4% and 1% at the start of trading day, as investors feared that China may tighten monetary policy in order to tame rising inflationary pressures.
China’s National Bureau of Statistics today reported a 2.7% year-on-year gain in consumer prices in February, exceeding the 2.5% median gain shown in a Bloomberg survey. The government organisation also said that China’s industrial production rose 20.7% in the first two months of 2010, the most in more than five years.
The way things are going, it seems as though the inflation rate may top China’s 3% target in the first quarter, prompting the country’s central bank to raise interest rates ahead of schedule. It stands to reason that tighter monetary policy would weigh on China’s demand for commodities, which would in turn hit mining sector profitability.
The US initial jobless claims failed to provide any excitement either. The number of Americans making first-time jobless claims (initial jobless claims) fell by 6,000 to a seasonally adjusted 462,000 in the week ended March 6, the Labor Department revealed today. This was a touch higher than the 460,000 median estimate shown in a Bloomberg survey.
Meanwhile, the four-week moving average for initial jobless claims, which provides a more accurate idea of trend by smoothing out weekly volatility, rose 5,000 to 475,500, the highest since late November.
The American trade report was also on today’s agenda. It has emerged that the American trade deficit decreased 6.6% to $37.3 billion in January, down from a revised $39.9 billion the prior month, and better than the $41 billion median forecast shown in a Bloomberg survey.
Although a reduction in the deficit is a good thing, exports were rather disappointing, falling 0.3% or $500 million to $142.7 billion on the month - the first decline since April.
The decline was predominantly driven by weaker foreign demand for autos and commercial aircrafts, however – likely to be a temporary phenomenon linked to poor weather conditions in January.
Imports declined as well, falling 1.7% or $3.1 billion to $180 billion, following a drop in crude oil imports.
Elsewhere, shares of Citigroup advanced 1.8% to $4.03 today, after the FT reported that it may tell investors it anticipates potential profits of as much as $20 billion from its core business within a few years.
Banking peers Wells Fargo and Bank of America were up between 0.1% and 0.4% respectively. Meanwhile, AIG rose 2.3% to $37.08 a share after saying that the Federal Reserve Bank of New York has agreed to back the company.
The above comments do not constitute investment advice and IG Markets accepts no responsibility for any use that may be made of them.
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