Scoreboard: House mates?

Two events drove market moves last night, but not necessarily in the same direction. Firstly there was some positive news on the US government shutdown front – politicians look willing to talk. Specifically, President Obama has booked a meeting with congressional Democrats, which should be taking place as I write.

The positive thing about that is about 20 members of the GOP are expected to attend. It’s positive because it seems Republicans have shifted their demands slightly from a delay to ‘Obamacare’ to just budget negotiations – which of course Obama has already agreed to – when the shutdown ends. It may not be much but it’s something.

That helped a bid for stocks and at the time of writing (close to the bell) the S&P500 was up 0.1 per cent (1656), the Dow was 57 points higher (14,832), while the Nasdaq was down 0.1 per cent (3687). On the upside we saw telecommunications, utilities and financials making modest gains, although on the downside were energy, industrials and consumer services.

Now it’s highly possible that gains in the equity market would have been stronger if not for the second key event – the Federal Open Market Committee minutes. Indeed at the high, the S&P500 was up nearly half a per cent. The minutes came in and after people had time to digest things, the offer came on. The minutes were certainly interesting.

Apparently the decision not to taper was a 'close call’ for some participants. Now this wasn’t necessarily new news, but it does highlight to markets that the Fed is still toying with the idea of a taper by the end of this year. It’s maybe less likely now the government has shut down and of course Janet Yellen’s appointment to the chair is widely seen as a dovish event.

Recall that Janet Yellen was the first to dilute or play down the Fed’s economic targets. She noted some time ago that even if the Fed’s economic targets to taper and raise rates were met, the Fed still may not do either. Yet the fact that the decision was a close call and that FOMC participants hadn’t changed their outlook materially, suggests the taper is still a strong possibility if the shutdown gets sorted.

That’s probably why we saw the dollar index spike – initially although it’s subsequently come back down – and why commodities were all weaker. Gold was down almost $20 to $1305, silver fell 2.6 per cent, copper was off 2 per cent and crude also fell about 2 per cent (just shy, to sit at $101.4).

That’s the key market stuff for overnight. Otherwise the Australian dollar is up slightly from yesterday afternoon – 0.9444. Then the euro is down about 40 pips to 1.3520 and the yen is at 97.32 – little changed from yesterday afternoon.

So then just a quick word on those domestic consumer confidence figures we saw yesterday. Firstly, it was a small fall of 2 per cent or so which fits in with the normal statistical variation that you would expect month to month – especially coming after a decent rise. At this point I wouldn’t attach to much importance to it, and I don’t think it represents a change in direction. Moreover I don’t think global events – US shutdown etc – have had any impact in the decline, because the truth is global developments really didn’t boost confidence much earlier.

On the contrary, I view this result and obviously the business confidence figures we saw earlier as confirmation the recent spike in confidence is/was more than an election induced sugar hit. Although that clearly helped, there is something more fundamental at play here.

Looking at our day ahead then, the SPI suggests Aussie stocks will fall 0.1 per cent. Then employment figures are the key economic statistics for Australia. Going into the figures, the market looks for an increase of about 15,000 which doesn’t sound bad, but this follows an 11,000 decline the month prior.

The unemployment rate itself is expected to remain around 5.8 per cent. Abroad, we see Chinese loans data and money supply growth, the Bank of England rates decision, US jobless claims, the monthly budget, while we see a number of Fed speakers – Bullard, Tarullo and Williams.

Have a great day…

Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.