Not a massive night by any measure, but not devoid of interest. For a start, the US 10 year Treasury note continues to rally and yields were down by about 4 bps overnight. So far then it has lost nearly 10 bps since the FOMC meeting last week. It looks to me that markets are warming to the idea that the Federal Reserve’s taper may not even happen this year and there was a bit of commentary in the press overnight to that effect.
Once again though there was no euphoria in the market. Commodities in particular continue to weaken — copper off 1 per cent, crude off 0.3 per cent ($103.3) and gold off smalls to $1323 — that’s in the face of economic data that was, on balance, very positive. There is a clear disconnect here although the debt ceiling is hanging over the market like a bad smell. So for instance, US house prices shot up another 1 per cent in July, which brings the annual gain to 12.4 per cent — the fastest pace in seven years. Some cities, like Las Vegas, San Francisco and Los Angeles are exceeding the national average gain by some margin, seeing gains of over 20 per cent for the year.
Not bad and whilst I’ve mentioned this before, I’m very surprised that the combination of solid data and a taper delay isn’t offering more support to markets. Fair to say that the economic data wasn’t all positive and for last night we found out that the Richmond Fed manufacturing index fell to 0 in September from 14. Moreover consumer confidence slipped to 79.7 in September from 81.8 in August. Yet if you weight the data by importance and note that the fall in consumer confidence is so small it probably isn’t even statistically significant the overall the news flow was good. I mean those regional Fed manufacturing surveys are notoriously volatile as well.
In any case, the S&P500 fell 0.3 per cent (1697) at the bell, while the Dow was off 66 points (15,334) — in both cases a late session sell off. In fact the S&P500 had spent most of the time in positive territory — up only 0.3 per cent at the high though. The Nasdaq managed to keep its gain if only just with a 0.1 per cent rise (3768). Financials were the worst performer overnight, off about 0.5 per cent and I think JP Morgan’s offer to pay $3 billion to the Justice department to settle a number of probes is weighing on the sector. Healthcare and consumer goods followed close behind though.
Over in Europe, sentiment was slightly better and markets there posted modest gains with the Dax up 0.3 per cent, the CaC up 0.6 per cent and the FTSE100 0.2 per cent higher. Stronger economic data or an improved economic outlook is driving things here and last night the German IFO survey was released. This is one of the better European surveys and it showed that expectations or confidence in future conditions are getting better — the index rising to 104.2 from 103.3. The business climate index itself was up only one point to 107.7 from 107.6, but it’s not a fall and the fact is the index is well above average. Similarly, the Spanish PM suggested that Spain came out of a recession in the September quarter and should post stronger growth in 2014 than initially thought — around 0.5 per cent to 1 per cent from 0.5 per cent.
There wasn’t too much else news wise and for the remaining price action the Australian dolalr is at 0.9391 from 0.9416 late yesterday afternoon. Euro is at 1.3473 or down about 20 pips, while yen is at 98.76.
For our market today then, the SPI points to a flat outcome today (down 3 points to 5239) and there isn’t much in the way of news or data that might spark things up. There is little data for Australia or elsewhere around the region with the Kiwi trade balance, the RBA’s financial stability review and skilled vacancies index from the Australian department of employment about it for our session. Tonight, the key data includes some heavy hitters though, like US durable goods orders and new home sales.
Have a great day…