\n\tBy Greg Peel<\/p>\n
\n\tThe Dow fell 42 points, or 0.3%, while the S&P lost 0.5% to 1650 and the Nasdaq<\/span> dropped 0.2%.<\/p>\n \n\tLast night the Dallas Fed president suggested the Fed should start reducing bond purchases with the goal of winding them back completely as the year continues. The president of the San Francisco Fed said QE could be reduced if the economy “continues to improve”.<\/p>\n \n\tLate-season reporter Wal-Mart (Dow), America’s biggest corporate employer, posted a profit result that missed expectations on falling sales growth.<\/p>\n \n\tUS housing starts dropped 18.5% in April. This number looks like a shocker but for the fact the bulk of the drop was related to lumpy apartment block starts, while starts of single family homes fell only 2.1%. Apartment block starts jumped in March, so over two months the numbers are smoother.<\/p>\n \n\tThe Philadelphia Fed manufacturing index has fallen to minus 5.2 this month from plus 1.3 last month.<\/p>\n \n\tThe April CPI fell by 0.4% against expectations of a 0.3% drop. As was the case for Wednesday’s PPI, lower energy costs were the main driver. US headline inflation is now running at a mere 1.1%, while core inflation (ex food & energy) is running at 1.7%, the lowest level for two years.<\/p>\n \n\tIn such a low inflation climate, the Fed has plenty of scope to increase, rather than decrease QE. Yet all the talk is as to just how soon the Fed will start pulling out. There’s no inflation threat, and the latest economic data are far from inspiring. There is a cohort within the Fed which, for good reason, would like to see the US economy taken off the morphine and allowed to recover for itself. Ben Bernanke is not among that number.<\/p>\n \n\tSpeaking of morphine, and lots of it, the Japanese GDP grew by 0.9% from the December quarter to the March quarter for an annualised<\/span> growth rate of 3.5%. Economists had expected 2.8%. In the June and September quarters last year, Japan’s economy contracted. In the December quarter, in which Abenomics<\/span> was outlined, it grew by 0.3%, and in the March quarter, in which Abenomics<\/span> was implemented, it grew by 0.9%.<\/p>\n \n\tThe jury is out on Abenomics<\/span>, particularly with a GDP running at 3.5% growth when 2.8% was expected and would still be a big improvement. Is it all too much too soon? Could it all end in tears? Economists are watching nervously.<\/p>\n \n\tThe US dollar index was little changed at 83.78 last night, but that hasn’t stopped the Aussie taking another tumble over 24 hours, falling 0.9% to US$0.9807. Another weak day on the local bourse yesterday suggests a foreign exit still in progress. The weak US inflation number was no help to gold, which fell another US$6.90 to US$1386.00\/oz.<\/p>\n \n\tThe Japanese GDP result provided some rare upside for base metal prices in London, although earlier gains were crimped when the weak US data began to flow. A steady US dollar at least allowed copper to finish up 1% and other metals to be steady to slightly higher. The oils were also slightly stronger, with Brent rising US12c<\/span> to US$103.80\/bbl<\/span> and West Texas up US75c<\/span> to US$95.05\/bbl<\/span>.<\/p>\n \n\tThe spot iron ore price continues to slip back in China, yesterday falling US$1.40 to US$125.00\/t.<\/p>\n \n\tThe SPI<\/span> Overnight rose 3 points.<\/p>\n \n\tTonight in the US sees the release of the Conference Board’s leading economic index for April. I’ve never much liked this index given one of its major “indicator” components is the stock market. It is true that the stock market is a forward indicator, but good results for the index on the day tend to push the stock market up and vice versa, which to me implies the market goes up because the market went up. March’s index was negative for the first time in months despite a strong stock market. \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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