There was a bit of volatility around the open, but US stocks were largely bid for most of the session – as hopes grow that a deal on the budget impasse might be reached – possibly by this morning (afternoon US time). I haven’t heard what House Republicans think of the deal, but the rhetoric is all good so far in the Senate and the White House. Indeed Senate leaders Harry Reid and Mitch McConnell both expressed optimism, again, that a deal might be reached as soon as today – although talks with the White House that were planned for this morning have been delayed.
That doesn’t mean a deal can’t be reached and Senate leaders were aiming to come up with a deal before talks with President Obama. Yet news of the delay saw stocks give back some of their earlier gains as and as I write, the S&P500 and Dow are up about 0.4 per cent (1709 and 15,291 respectively), while the Nasdaq is 0.5 per cent higher (3812), tech stocks obviously outperforming, alongside energy (although crude prices are up only 0.1 per cent to $102.1 on WTI), and health.
There wasn’t much else to the price action – unfortunately US bond markets were closed (for Columbus Day) so we don’t have a great idea of what the reaction to a ‘deal’ might have been here – Treasury futures were down a bit and Aussie 3-year and 10-year debt futures are off about 6 ticks a piece (98.84 and 95.86). Otherwise gold was up smalls $5 to $1273 and copper was 0.9 per cent higher.
Otherwise it’s interesting to note that the Australian dollar is hovering around the 0.95 US cent mark, although the actual move overnight was modest – around 30 pips or so. The euro was also up about 30 pips at the high, 1.3592, but is little changed this morning from yesterday afternoon at 1.3566. The yen is otherwise at 98.56 from 98.25.
In terms of other news and data flow there was a little. European industrial production rose 1 per cent in August, offsetting a fall of 1 per cent the month prior. That was largely it. Looking at the day ahead, the SPI points to a 0.7 per cent gain for our market. Otherwise the key data and news flow include car sales at 1130 AEDT and then the Reserve Bank’s minutes at the same time.
The growing expectation is that the Reserve Bank is done with cutting rates. While I certainly hope that is true, I’m not convinced. The board does, or at least did, have an exchange rate target. The difficulty is that we no longer know what emphasis is being put on the exchange rate with the change of government. Recent rhetoric from the bank shows it is still concerned about the level of the currency, and not so much about a housing bubble.
Looking abroad, we see consumer prices out of the UK and the German ZEW survey. Then for the US, the Empire State manufacturing survey is out and we see two Fed speakers – Richard Fisher (a non-voter this year) and William Dudley (a voter and vice chairman).
Have a great day…
Adam Carr is a leading market economist.
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