Scoreboard: Nuclear reaction

News on Iran’s nuclear reactions sparked big crude moves, though a public holiday left Wall Street becalmed.

With an hour or so left to trade, stocks on Wall Street are still hovering around the zero mark. I guess most of the excitement was last week, when many financial market economists learned everything they thought about the US was wrong and the Federal Reserve lost what little credibility it had left. In any case it was the Veteran’s Day Holiday with government offices and bond markets closed and so the odds of excitement were always low. For last night’s session, there wasn’t much oomph left, but gains were held. I think if anything that’s the key take and we are still talking records for stocks on both sides of the Atlantic.

As for the actual price action itself, it was muted and the S&P only traded within a three point range (1771 at the time of writing). The Dow was only 11 points higher (15,773) and the Nasdaq was flat (3920). There wasn’t even a major divergence by sector either, except for maybe telecommunications which were off nearly half a per cent at the time of writing. Consumer services outperformed, if you can call it that, with a gain of 0.3 per cent.

Most of the session’s excitement was actually in the crude market. Brent was 1.3 per cent higher ($106.4), while WTI was 0.5 per cent higher ($95.09). All things considered these are big gains and they look to be related to this news-flow about Iran and the failure to achieve a deal on their nuclear program and so lift sanctions. Or lift some sanctions. There has also been some index reweighting by major indexes that favour Brent and would see more money invested in that contract. Otherwise there wasn’t much in the commodity space – copper did nothing and gold was off 0.1 per cent ($1283).

So with the bond market closed that leaves FX. The Australian dollar is at 0.9356 which is about 30 pips weaker than yesterday, while euro in contrast is about 40 pips higher 1.3409. Yen is at 99.21 from 98.99.

Bits and pieces otherwise. There is renewed talk (first flagged in September) in the market that China may be considering lowering its growth target to 7 per cent from 7.5 per cent. Although having said that the growth target under the last five year growth plan was 7 per cent and growth, not to mention the annual growth target’s, have exceed that in every year. The Greek government survived a vote of no confidence – just ‘kicking the can’ people.

Looking ahead, the SPI points to 0.5 per cent gain for our market today. Otherwise the key data for our market are the business confidence indicators (1130). Confidence has rebounded recently although actual reported business conditions remain weak. On paper, both should be above trend, although to be fair the actions of panicked policy makers and the misguided obsession with the Australian dollar has not helped but only hindered Australia’s economic prospects.

Outside of that there isn’t a lot in the way of data. Machine tool orders in Japan, and then inflation figures out of the UK. Well above target still. For the US, we get two Federal Reserve speeches (Narayana Kocherlakota and Dennis P. Lockhart) while the dataflow itself is minor – NFIB business optimism and the Chicago Fed National Activity Index.

Have a great day…

Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.

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