SCOREBOARD: ISM injection

Snap. There you have it. Coinciding with the start of a new quarter, the ISM index bounced back over the 50 mark in September (51.5 from 49.6) having spent the last three months below. Expectations were that the index would remain largely unchanged. As regular readers will know, this is a good survey, the best by far, but I was reluctant to buy the hype around the dip. Data is volatile after all and last night's moves show the wisdom in being cautious. The index confirms trend growth in the US economy and suggests we may even see an acceleration after the summer lull.

At this point, global stocks got a solid boost, European stocks receiving another leg up having pushed higher in the lead up. The absence of bad news seems to be good news in Europe, which is probably why the bid was on early. I can't really see too much European news otherwise. New news that is. In any case, the Dax finished 1.5 per cent higher, the CaC was 2.4 per cent higher and the FTSE rose 1.4 per cent.

Soon after the open, the S&P was up 1.2 per cent, boosted by that jump in the ISM index. It didn't last though and shortly after the offer was on, although I can't really tell what drove it from the news or data flow. At the bell the S&P500 was up only 0.3 per cent (1444) although the Dow managed 0.6 per cent (13,515). The Nasdaq for its part fell 0.1 per cent (3113) while the SPI rose 0.3 per cent to be at 4414.

Commodities tended to follow a similar path to equities, getting a boost after the ISM index but then giving back those gains for the remainder of the session. Crude ended flat virtually ( 0.1 per cent to $92.3) and copper and gold weren't much better – up 0.4 per cent or $US4 to $US1777.

Price action elsewhere was limited. In the forex space we saw Australian dollar up about 60 pips to 1.0364 and euro was up about the same to 1.2886 – USD moves here. Not much action otherwise, the pound sterling is at 1.6131 and yen sits at 77.98. then on the rates side, US Treasuries traded within a few bp and ended little changed. The 10-year is at 1.61 per cent, the 5-year at 0.61 per cent while the 2-year yield is sitting at 0.23 per cent. Aussie futures were off 4-5 ticks with the 3s at 97.63 and the 10s at 97.07.

In other news, we saw some European data out last night and while it improved, it still suggests activity remains sluggish. The finals estimate of the eurozone PMI was at 46.1 from 46 initially, and the unemployment rate (for the eurozone) was steady at 11.4 per cent. There was also a modest improvement in China's PMI yesterday from 49.2 to 49.8. The Fed Chairman Bernanke, also had some commentary out last night in which he suggested the Fed printed again because economic growth was too slow to bring the unemployment rate down. He suggested that the FOMC's commitment to accommodative policy through to mid-2015 wasn't a suggestion that they expect the economy to remain weak, but that even after it strengthened, rates would remain exceptionally low. For mine, that's guaranteed inflation. That said, Bernanke reiterated his confidence that inflation wouldn't lift as the Fed has the tools to withdraw accommodation when needed. I think the contradiction in his commentary is visible for all to see.

Looking at the day ahead, we get the RBA meeting today at 1430 AEST. I've written up my view on why the RBA should not cut here. And certainly there is no economic justification to cut rates. That said the meeting is live. Recall that the board cut rates earlier this year on the view that the domestic economy was weak. Shortly after data was released confirming the strongest growth in five years. This is what we are dealing with. People argue that the high Australian dollar is crunching growth and that fiscal policy is contractionary. Again, two falsehoods that have been bandied around for the better part of two years. All the while growth has accelerated to its fastest place in five years. No, it simply cannot be argued with any credibility that the high Australian dollar, or any fiscal consolidation is unduly harming the overall performance of the economy. For what it's worth 19 of 28 economists forecast no change today although the futures market has a cut priced in.

Other than the RBA, we get the RBA's commodity price index at 1630 AEST then tonight we see eurozone producer prices, US car sales and a New York manufacturing index.

Have a great day…