IMF warns against false sense of security: Morning market insights

International Monetary Fund managing director Christine Lagarde urged policy-makers yesterday to be vigilant as oil prices, debt levels, and the risk of slowing growth in emerging markets continued to threaten global economic stability.

Optimism should not give us a sense of comfort or lull us into a false sense of security,” Lagarde said in a speech at the China Development Forum in Beijing.

“We cannot go back to business as usual,” she said.

Wall Street

On the New York Stock Exchange, the Dow Jones Industrial Average was flat over the weekend, down 0.15% or 20.14 points to 13232.60, consolidating most of the gains of the equities rally last week. The widely-followed indicator is up over 8% this year.

The S&P500 Index was up 0.11% or 1.57 points to 1404.17, while the NASDAQ Index was also flat, falling 0.04% or 1.11 points to 3055.26.

The West Texas Intermediate (WTI) oil price rose 1.86% to $US107.06 a barrel at the weekend on the back of growing optimism last week.

Gold fell 0.22% on all the good economic news coming out of the United States to be trading at $US1655.80 an ounce.

One Australian dollar was buying $US 1.0595 at 8.20am AEST today – up over half a US cent over the weekend.

Europe

European stocks posted good results with the Euro Stoxx 50 Index climbing during the week. The index has rallied 11% this year as US economic reports beat forecasts. The index covers 50 stocks from 12 Eurozone countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. It is licensed to financial institutions and serves as an underlying measure for a wide range of investment products such as exchange-traded funds, futures and options, and structured products worldwide.

“The US economy is a very, very strong support for the market,” Pierre Mouton told Bloomberg on Saturday. Mouton is a fund manager who helps oversee $US7.5 billion at Notz Stucki & Cie in Geneva. “The data is confirming that the economy really is rebounding, and more rapidly than expected. We’ve turned the page.”

The London FTSE 100 closed up Saturday morning, 0.42% or 24.86 points to 5965.58.

The German DAX was also up 0.19% or 13.37 points to 7157.82.

The European Stoxx50 index was up a solid 0.55% or 14.33 points to 2608.30.

Asia currencies decline

Asian currencies had a second weekly decline as an improving US economy and the US Federal Reserve’s decision not to embark on further money printing boosted demand for the dollar. China’s housing prices fell in February in more than half of the 70 cities monitored by the government. Premier Wen Jiabao said last week China’s housing prices remained far from reasonable and called on the government not to slacken efforts to regulate the housing sector. Relaxing the curbs could cause chaos in the market, Wen said.

“With more supply coming in spring, prices will fall further,” says Lan Shen, a Shanghai-based economist at Standard Chartered. “There will not be a total reversal of the government’s tightening policies this year and any sort of policy fine-tuning will have a limited impact of the market.”