Scoreboard: Fed downer

Wall Street edged lower on weak personal spending data and St. Louis Fed President James Bullard’s comments that the Fed could hike rates sooner than expected.

Not a great night on either side of the Atlantic -- equities sold off, while bonds rallied further. Markets appear to be increasingly concerned about US growth prospects following that weaker-than-expected first quarter print. Not that data out last night was too bad or anything. Jobless claims remain low at 312,000 (down 2000 in the week to June 21). Yet neither was there anything to give sentiment a lift -- consumer spending was also weaker-than-expected.

Equities posted only modest declines on Wall Street though, the S&P 500 down 0.1 per cent (1957), the Dow lost 21 points (16846), while the Nasdaq was off 0.02 per cent (4379). By sector, consumer goods and financials seem to be hardest hit, with utilities outperforming. Over in Europe, stocks generally under-performed with the Dax off 0.6 per cent and the CaC down 0.5 per cent. The FTSE 100 was up 0.02 per cent. Overall, European stocks have declined in 4 of the last 5 sessions.

Rates eased further overnight, the US 10-year yield falling 2bp to 2.360 per cent. The 5-year yield followed suit, falling around 3bp to 1.647 per cent, while the 2-year is at 0.464 per cent. Australian futures were up a tick or so -- 3s at 97.30 and 10s at 96.415.

Commodities were generally weaker. Moves in the metals space were small though; Gold sits at $1318, copper and silver were off about 0.1 per cent. Crude prices posted a more dramatic fall, WTI down 0.7 per cent to $105.7, while Brent was 0.9 per cent weaker ($113.1). There are a few bearish influences here. First, inventories seem to be on the rise again, and second, the market is still digesting the US government’s decision to allow oil exports.

Forex markets saw only small moves on the euro, which at the time of writing was around 20 pips (1.3610) weaker than at 4.30pm yesterday (AEST) on a 50 pip range. The British pound rose around 30 pips to $US1.7023, while the US dollar buys 101.7 Japanese yen. As for the Australian dollar, it sits around $US0.9412 or little changed from 4.30pm (AEST) yesterday.

Elsewhere, US data showed personal income rising by a strong 0.4 per cent in May following a 0.3 per cent gain the month prior. Personal spending rose 0.2 per cent, which was weaker than the 0.4 per cent expectation, after a flat outcome the month prior. The PCE deflator showed that inflation accelerated in May, rising 0.2 per cent for the month after a 0.2 per cent gain prior. Annually, the PCE deflator is up 1.8 per cent. Finally, the St. Louis Fed President spoke last night and suggested that the Fed was much closer to reaching its targets than the market appreciated. He suggested the Fed was very close to tightening rates and that early 2015 was the most likely timing.

Markets today. The SPI suggests that stocks will post small gains today (8 points). Data-wise there isn’t anything for Australia, although an Assistant RBA Governor appears before a parliamentary committee on foreign investment in Australian real estate. Chinese industrial profits at 11.45am (AEST) is also worth keeping tabs on. Tonight, we see the breakdown of UK first quarter GDP, the eurozone business climate indicator, German CPI for June and the final estimate of consumer confidence (estimated by the University of Michigan).

Have a great day.