\n\tBy Greg Peel<\/p>\n
\n\tThe Dow closed down 8 points, while the S&P was flat at 1652 and the Nasdaq<\/span> rose 0.5%.<\/p>\n \n\tGee those Chinese data releases are a barrel of laughs at the moment aren’t they? Talk about killing the mood at a party. The ASX<\/span> 200 was up in excess of 1% yesterday despite Chinese trade data being due at midday, and despite expectations they wouldn’t look that flash. But no one was quite prepared for just how bad they were.<\/p>\n \n\tExports fell by 3.1% (year on year) in June compared to expectations of a 3.7% gain. Imports fell by 0.7% compared to expectations of a 6.0% gain. By region, exports to the US fell 5.4%, to the EU 8.3%, and to Japan 5.1%. The balance came from exports to the ASEAN bloc, up 10.2%. Not counting Australia, the Asia ex-Japan market appears to becoming an increasingly closed shop. (See: Don’t Panic, Asia Grinding Ahead<\/a>)<\/p>\n \n\tThe data release was enough to ensure the ASX<\/span> 200 closed up only 0.4%. Didn’t seem to bother the Chinese nonetheless, with the Shanghai index rising 2%.<\/p>\n \n\tNot helping the mood was a headline-grabbing update from the IMF economists – the ones that believe one day man will walk on the moon. The IMF downgraded its Chinese GDP growth forecast to 7.8% from 8.1% in 2012 and the Australian media had apoplexy. No, that is not a typo; the IMF may have published the forecasts as “2013” but the economists live in a parallel universe that runs a good year behind. They boldly predicted a GFC<\/span> in 2009. Yesterday’s downgrade to 7.8% is about on the money for 2012 but as for 2013, well most non-IMF economists are already suggesting 7.5% or lower. If this IMF forecast really is for 2013 then it would be considered an UPGRADE to consensus.<\/p>\n \n\tWrite this down: Always ignore the IMF. And the World Bank’s no better.<\/p>\n \n\tMoving to Wall Street, there was much anticipation but little movement in indices last night as traders awaited the release of the Fed minutes at 2pm<\/span>. There was a brief spike of volatility on the release until the market realised<\/span>, just as I had predicted in this Report yesterday, that there were no further clues on tapering therein. Apparently around half the FOMC<\/span> members were keen to start tapering, but timing was not made clear. Wall Street thus closed flat and waited for the speech and Q&A Bernanke was set to give after the closing bell.<\/p>\n \n\tIn essence, Bernanke threw a bucket of cold water over September first-tapering expectations. Not directly but implicitly. He suggested that parts of the US economy were looking healthy but elsewhere risks remain, and crucially he suggested the current 7.5% unemployment rate was misleading when one takes the participation rate and the long term unemployment rate (around 14%) into account. Inflation is behaving itself at 1%, and a highly accommodative monetary policy stance is still required at this point. The ultimate target for a rate rise of 6.5% unemployment is only a threshold, the chairman emphasised<\/span>, not a trigger.<\/p>\n \n\tThe US dollar subsequently tanked, down over 1% on its index. As I write, the Dow futures are up 56 points and the more relevant S&P futures are up around 0.5%. The US ten-year yield had risen 5bps<\/span> to 2.68% ahead of Bernanke’s speech, but has now collapsed to 2.60%. Indeed, I suggest readers ignore the “closing” price data published on the FNArena<\/span> website this morning as it is pre-Bernanke and thus old news. One has to take a snapshot at some point, however. Gold is US$7.20 higher at US$1255.20, but will probably see more upside when Asian trading kicks in.<\/p>\n \n\tThe SPI<\/span> Overnight swung from down 10 points pre-speech to up 5 points after before closing.<\/p>\n \n\tOne little snippet from amongst the sobering Chinese trade data was a 10% year on year increase in copper imports. This lit a fire under the LME<\/span> and sent all base metal prices up 0.5-1.5%, with copper up 0.6%. The LME<\/span> closed ahead of the minutes, let alone the speech.<\/p>\n \n\tThe commodity grabbing a lot of attention at the moment is oil. Two factors are at work here. Firstly, tensions in Egypt and concerns over Suez Canal access have floated all boats, lifting Brent and West Texas crudes<\/span> equally. But at the same time, oil is now flowing out of Cushing like a tsunami now the pipeline from the Gulf Coast refinery region has been reversed. The unblocking of this supply bottleneck means storage at Cushing is no longer at a premium, hence as the storage carry-cost falls, the price of the crude itself rises. Confused? Just look at prices. Last night Brent fell slightly to US$107.98\/bbl<\/span> but West Texas jumped US$2.55 to US$106.08\/bbl<\/span>. Having traded as high as US$26 in the past two years, the Brent-WTI<\/span> spread is now only US$1.90. Some analysts are expecting a full reversal.<\/p>\n \n\tFedspeak<\/span> won’t make a difference to spot iron ore. It was up US20c<\/span> to US$123.90\/t.<\/p>\n \n\tAnd a check of the Aussie as I write shows US$0.9222, up 0.5% over 24 hours.<\/p>\n \n\tPresumably Wall Street can relax now, and rather than buy stocks on an improving economy they can buy stocks on stronger for longer QE. Meanwhile, the Australian jobs numbers are out today and the Bank of Japan will hold a policy meeting.<\/p>\n \n\tRudi will appear on Sky Business at noon and tomorrow on BRR's<\/span> Media's Friday Afternoon Round Table at 1pm<\/span>.<\/p>\n \n\t. \n\tAll paying members at FNArena<\/span> 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
\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<\/span> Cockpit. Click here<\/a>. (Subscribers can access prices in the Cockpit.)<\/em><\/p>\n