Market drives higher as GM hands over the keys

June 2nd, 2009  by Bryden Elssmann

Closing Data

	current	change	%
Dow Jones	8721.44	221.11	2.6%
NASDAQ	1828.68	54.35	3.1%
S P 500	942.87	23.73	2.6%
FTSE 100	4506.19	88.25	2.0%
Nikkei 225	9677.75	155.25	1.6%
SPI Futures	3932	44	1.1%
All Ords	3,888.00	74.6	2.0%
Oil	68.59	2.28	3.4%
Gold	978.6	-0.2	-0.0%
Silver	15.735	0.125	0.8%
Aluminium	1425	41	3.0%
Copper	4947	171	3.6%
Lead	1640	110	7.2%
Nickel	14275	505	3.7%
Tin	14800	475	3.3%
Zinc	1551	42	2.8%

Wall Street

US stocks rose sending the S&P 500 to its highest close for 2009, as reassuring economic data reinforced hopes that demand will stabilise.  The S&P 500 gained 23.73 points, or 2.58 percent, to 942.87. The Dow also shot up 221.11 points, or 2.60 percent, to 8721.44. Investors were also encouraged by signs of manufacturing stabalisation from China, with demand from emerging markets for commodities and other resources seen as leading a revival of global growth.
 The market seemed to welcome General Motors’ long-expected bankruptcy filing as it ended uncertainty about the automaker’s fate. The former US car giant General Motors handed over the keys to the US Government as it formally commences bankruptcy proceedings. The US Government will take a 60 percent stake in the company.  The bankruptcy will see GM attempt to restructure more than $US79 billion in debt while protecting 56,000 jobs. The restructure could also mean selling Holden, though without the protection of a parent company to access cheap supplies question marks over the Australian carmaker's viability would remain.

VIX

On an interesting note the CBOE Volatility Index (VIX) is straying from its normal pattern. The VIX normally moves lower when stocks rally. However the index was up .80 to 29.72 and the gains in the index might be due to the “event risk” going forward. The economic calendar is busy throughout the week and includes key monthly payroll data Friday. The gain seems to reflect the view that market volatility might stay elevated despite the big gains in the market.

Oil

Oil has risen to a new 2009 high trading at $US68.58 a barrel, up $US2.27 or 3.4 percent. Investors disregarded soft demand and seized on any data that forecast strong consumption.  Buoyant prices, if sustained, could stabilise budgets for exporters hit hard by the recent crash. After the Organisation of Petroleum Exporting Countries decided to keep quotas steady, the Saudi cabinet estimated $US75 to $US80 a barrel as a fair price for crude.

The Aussie Dollar

The Australian dollar hit a new eight-month high on Monday, rising above US81c,  as data showing a growing manufacturing sector in China and firm retail sales at home fanned hopes that the world economic crisis was easing. The upbeat mood in markets also added to speculation the Reserve Bank of Australia (RBA) would again refrain from cutting interest rates, from a record low of 3 percent, at its monthly policy meeting this morning.

ASX

Australian stocks rose 2 percent to a three-week closing high on Monday, supported by heavyweight resources stocks amid upbeat global economic data that brightened the outlook for demand for commodities.

New Zealand's stock market was closed on Monday for a public holiday.

The market is expected to open stronger this morning following the lead from Wall St and commodities. The SPI is currently up 48 points to 3936.

Quote of the day:

"The person that is buying a share of stock is convinced he knows something that the other person who's selling it to him does not know. There's no zero sum game in Wall Street." Bernard Madoff

Contact your Freeman Fox Stockbroker on 07 3031 9960 or 1800 003 369 Ext 7.

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