Strong Manufacturing Reports Take Dow Up to 18 Month Highs

April 6th, 2010  by Katy Loi

Closing Data

	Current	Change	%
Dow Jones	10,973.55	46.48	0.4%
NASDAQ	2,429.53	26.95	1.1%
S P 500	1,187.43	9.33	0.8%
FTSE 100	5,744.89	0	0.0%
Nikkei 225	11,339.30	53.21	0.5%
ASX 200	4,936.00	28.3	0.6%
COMEX Gold - Dec 09	1,133.80	7.7	0.7%
COMEX Silver - Sep 09	18.118	0.228	1.3%
COMEX Copper - Sep 09	363.15	4.75	1.3%
WTI Spot	86.78	1.63	1.9%
AUD-USD	0.9215	0.0027	0.3%
Aluminium	2,330.00	0	0.0%
Copper	7,881.00	0	0.0%
Lead	2,182.50	0	0.0%
Nickel	25,475.00	0	0.0%
Tin	18,690.00	0	0.0%
Zinc	2,370.00	0	0.0%

The Dow added another 46 points overnight in addition to a 70 point gain last Thursday taking the market to an 18 month high as reports reflect higher global manufacturing. The Institute of supply management index of US manufacturing topped economists' estimates. The S&P 500 has just finished its fifth straight weekly gain, the longest in almost a year.  The average number of U.S. jobless claims over the past month fell to the lowest level since 2008, boosting optimism the labor market is improving.  Also supporting the market was March payrolls which came out on Friday night whilst markets were shut.  Payrolls rose by 162,000 workers, the third gain in the past five months and the most since March 2007, figures from the Labor Department showed yesterday in Washington. The jobless rate was unchanged even after Americans who had previously dropped out of the workforce decided to resume the job search, pointing to growing confidence that the world’s largest economy will continue to grow. A strong job report means a stronger dollar.  Futures markets indicate that there is a 60 percent chance the Fed will raise the target rate for overnight bank lending by at least a quarter-percentage point by November. 

Gold closed up $7 nearer the session high and hit another fresh two-week high. Fresh fund buying to start the new month and new quarter was featured Thursday. A lower U.S. dollar index and higher crude oil prices again supported buying interest in the precious metals. Gold also continues to see good physical demand, especially from China. Oil advanced above $86 after reports showed U.S., Chinese and European manufacturing expanded. Crude oil closed on the highest settlement price since Oct. 9, 2008. The Purchasing Managers’ Index for China rose to a seasonally adjusted 55.1 in March from 52 the previous month which is another good indication of growing demand.
 
Today our market is looking to open up 17 points as indicated by SPI futures. As the market prices in positive payrolls and manufacturing data from the US, we could add around 50 points on the opening.  Stronger commodities and oil prices will support our miners and energy stocks.  Buying strength could be subdued during the day as the RBA releases its rate decision, with there being an 80% chance of a 0.25% rise to 4%, this afternoon.  An hourly chart of the ASX cash index shows we have been trading in an uptrend channel since mid March; should buying strength be strong enough, the next extension would see our market up to 4965.  The market has broken strong resistance at 4920 and managed to close above that level which is a good indication of buying strength.  Historically, over the last 30 years, April has been the strongest month of the year 23 out of those 30 years. We could see the second quarter break out starting April as cash from the sidelines moves into equities.  The index has been trading above the 20 day moving average for a month which is a good sign of strength in the last up trend. This is the longest streak since we broke 4600 and have been range bound since October last year which could be enough momentum for the market to make new highs.
 
In company news, LGL American depositary receipts have spiked by 6.7% to $5.90 after Lihir spurned an $8.5 billion bid from Newcrest Mining Thursday, citing unsatisfactory value for its shareholders.
RIO has received a binding offer from Sun European Partners to acquire the Alcan Beauty Packaging business. The miner says a period of exclusivity with Sun European has been agreed to, with RIO saying it will respond to the offer following consultation with the relevant European works councils.  RIO has also finalized a new agreement with the Mongolian government for the development of a $4.4 billion copper-gold project in the country.
 

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