\n\tBy Greg Peel<\/p>\n
\n\tThe Dow closed up 21 points, or 0.1%, while the S&P added 0.3% to 1597 and the Nasdaq<\/span> jumped 0.7%.<\/p>\n \n\tThe early mood was not positive on Wall Street last night. The Chicago PMI is the last of the regional manufacturing activity gauges<\/span> to be published ahead of the monthly national PMI, which is due tonight. Economists were expecting a slight tick up to 52.5 from 52.4 in March, but instead the reading fell to 49.0, marking not only a three and a half year low, but more ominously a move into contraction.<\/p>\n \n\tOn the earnings front, Pfizer (Dow) posted a miss and downgraded its outlook, which saw its shares down over 4%. Elsewhere around the market, however, there was some more positive corporate news.<\/p>\n \n\tIBM (Dow) joined the list of large caps announcing an increase in dividend, and added a buyback to boot. Apple shares rose 3% after the tech leader successfully put away a US$17bn<\/span> corporate bond issue – the biggest in US history. Apple’s plan is to use the low interest-cost funds to underpin a dividend to shareholders and a share buyback.<\/p>\n \n\tThere is only one word on this market at present, globally, and that is “dividend”. Typically the success of any quarterly US earnings season is measured on whether net S&P 500 earnings beat forecasts. We’re on the downhill run of the season and to date around 70% of reporting companies have beaten on earnings. But those beating on revenue number less than half.<\/p>\n \n\tUS companies are beating on earnings by cutting costs, not by growing revenues. Access to cheap funds nevertheless offers companies the opportunity to increase distributions and shareholder value with dividend increases and buybacks<\/span>. Dividends on debt. What could possibly go wrong?<\/p>\n \n\tAustralian banks were, before yesterday, trading at higher PEs<\/span> than they were at the peak of the lending frenzy in early 2007. Yet ANZ<\/span> ((ANZ<\/span>)) announced an increased dividend payout ratio and all hell broke loose to the upside. The ASX<\/span> 200 jumped 1.3%, but it was all about a 2.5% surge in the financials index. Only telecos<\/span>, on a 1.0% gain for the other popular yield stock, Telstra ((TLS)), managed a sector gain anywhere near 1%, outside of the banks.<\/p>\n \n\tThe economic news was not all bad on Wall Street last night. The Conference Board measure of consumer confidence sat at 68.1 in February before plunging to 61.9 in March as the sequester budget cuts kicked in. Economists were expecting April’s reading to show a further easing to 61.3. Yet the measure bounced straight back to 68.1.<\/p>\n \n\tThe Case-Shiller<\/span> 20-city house price index rose 0.3% in February to mark 9.3% year on year growth – the fastest pace since the 2006 bubble. The pace of house price rises is beginning to worry some who fear another bubble forming, but while the pace of price rises might be bubble-rapid the distance back to actual house price highs is still quite daunting. The US stock market might be back into blue sky, but US house prices are nowhere near new highs.<\/p>\n \n\tThe result of all of the above is that Wall Street dropped sharply from the opening bell – 84 Dow points – before steadily rallying for the rest of the session. At the death the S&P 500 managed to tack an extra four points on to Monday’s all-time high to close out April on a positive note. Wall Street is now poised for tonight’s release of the next Fed monetary policy statement.<\/p>\n \n\tThe mood was not so positive in Europe. The eurozone<\/span> unemployment rate rose 0.1% in March to a new record 12.1%, including 25% of under-25s<\/span>. Last March the rate was 11%. Moody’s downgraded Slovenia to junk and in the wake of the new Italian prime minister’s call for a shift away from austerity policies and towards growth, his German counterpart was once again steadfast in a speech last night reiterating the need for fiscal rigour<\/span>. Angela Merkel is becoming increasingly friendless.<\/p>\n \n\tHaving decided to buy on Monday night ahead of China’s return from holiday tomorrow, last night LME<\/span> traders decided it best to square up for the end of the month and ahead of tonight’s Fed and Thursday night’s ECB<\/span> policy statements. Base metal prices fell around 1-2% with copper down 1.2%. With the Chicago PMI possibly hinting at a contractionary<\/span> result for the US manufacturing PMI tonight, the LME<\/span> is more focused on the data than Wall Street.<\/p>\n \n\tAs are the oil exchanges, with Brent down US$1.91 to US$101.83\/bbl<\/span> last night and West Texas down US$1.49 to US$93.01\/bbl<\/span>.<\/p>\n \n\tSpot iron ore remains unchanged with China on holiday, at US$134.10\/t.<\/p>\n \n\tCommodity prices fell last night despite a fall in the US dollar, by 0.5% on its index to 81.72. In the weak economic data stakes, the dollar won out over the euro. Gold was little changed at US$1476.30\/oz and the Aussie is up 0.2% at US$1.0372.<\/p>\n \n\tThe SPI<\/span> Overnight rose 3 points.<\/p>\n \n\tIt will be a busy next 24 hours. Today we’ll see the Australian manufacturing PMI for April followed by China’s equivalent (despite the holiday) and tonight we’ll see the same from the UK and US. Europe is closed for May Day tonight so its PMI will be out tomorrow night.<\/p>\n \n\tIn Australia we’ll also see home sale and house price data today and in the US the ADP private sector jobs number will provide a lead into Friday’s non-farm payrolls. And the Fed will release its statement. \n\tAll overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX<\/span> and more available in the FNArena Cockpit. Click here<\/a>. (Subscribers can access prices in the Cockpit.)<\/em><\/p>\n \n\tAll paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.<\/em><\/p>\n
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