SCOREBOARD: Cliff notes

US jobless claims fell and the deficit narrowed, but Wall Street still ended in the red as fiscal cliff worries rolled on.

Well for what it’s worth US data wasn’t too bad – jobless claims came down again – which is only good thing – and to 355,000 in the week to November 3 from 362,000. The expectation had been for an increase. Then on the trade front, the deficit narrowed to $41.6 billion from $43.8 billion on the back of a 3 per cent surge in exports – biggest gain in a year and to a new record high. Imports from China were up 1.5 per cent, so not a bad set of results. Somebody is buying US stuff right? And the US is still buying Chinese stuff.

Otherwise its game on for The Cliff and with the US election over, this is the main show in town. Its the reason why stocks were down for day two – the S&P500 off 0.5 per cent (1383) as I write, the Dow down 62 points (12,870) and the Nasdaq 0.8 per cent weaker (2912).

So far Obama hasn’t wasted any time – calling in four Congressional leaders to discuss The Cliff and how they can reach some sort of compromise. Previously there really wasn’t too much in the way of difference between the parties I might add. The main sticking point was whether rich people should keep tax cuts or not. This is laughable because the wealthy don’t pay tax in America – and nor should they. They are rich, which makes them better than you or I. Anyway, I suspect the main thing we’ll get out of these meetings is a meaningless deadline (a pre deadline deadline) that will never be met. Something dramatic – like Thanksgiving or if that’s too soon, something pre-Christmas (sorry Holiday Season).

We can’t forget that the US needs to fund its massive deficits and is doing so by using the printing presses – I suspect the Cliff will provide the cover for the Fed to restart buying US Treasuries when operation twist ends later this year. So personally I’m not looking for any short term resolution, it’ll go to the 11th hour – that’s my bet anyway. Fed to the rescue that sort of thing – we had to blah, blah. Then we‘ll get political resolution. Commodity markets certainly took that view last night and is why, I reckon, gold got the bid again last night – up about $19 to $1733, while silver was 2 per cent higher. Even copper and crude were up – 0.8/0.9 per cent a piece with crude now at $85.17.

Across the Atlantic there is still lots going on. The ECB met and didn’t make any changes to their cash rate not that it would make any difference. However they said they had reached their limit in terms of how they could help Greece, would not take any losses on bonds held (as that would amount to state financing) and couldn’t give a commitment to Spain as to how aggressively they would defend yields – if needed. On that note Spain is fully financed for the year now, selling €4.6 billion in bonds last night. Demand was strong, twice the amount on offer and yields lower – about 10-30bps. Otherwise German data continued to come in on the weak side, exports down 2.5 per cent in September after a 2.3 per cent ain the month prior. Imports were off 1.6 per cent following a 0.4 per cent gain.

Bits and pieces otherwise – for the price action, the Australian dollar is at 1.0412 (little changed), euro is also little changed at 1.2746. US treasuries bounced around on a 5bps range (10-year) and ended about 5bps lower in yield (1.632 per cent). The 5-year is a couple of bps lower at 0.64 per cent, while the 2-year is at 0.26 per cent. Aussie debt futures rose about 5 ticks a piece with 3s at 97.44 and 10s at 96.98.

Then we find that as Greece’s unemployment rate rose to another record high of 25.4 per cent – just below Spain’s rate of 25.5 per cent – the Greek parliament passed all the necessary reform measures they needed to free up the next installment of cash. But it isn't over – apparently the IMF and the EC differ over how much debt relief Greece should get and may delay the decision to release funds. But they have to make a €5 billion payment next week

Looking at the day ahead – the SPI suggests our market will be off 0.8 per cent but there is lots to throw our tings around with a run of Chinese data out at lunchtime. Inflation, industrial production and retail sales. Chinese trade data is out tomorrow. US data tonight includes wholesale inventories and the University of Michigan’s preliminary Confidence number for November.

Have a great day…

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