SCOREBOARD: Sluggish after Sandy

US markets lacked direction after the hurricane, but some key sectors will be adversely affected by the storm damage.

First day in two that US markets were open and to be honest I don’t think punters really knew what to make of it. Indeed the major exchanges are probably just trying to make sure everything works. Well there’s that and the fact we’ve got some big data pieces tonight and tomorrow with the ISM and payrolls.

In any case, the major indices have been bouncing around zero, pushing modestly higher at the open but then spending the rest of the session mainly in the red. Into the close it looks like a modest bid has developed and as I write, the Dow and S&P are flat basically (13106 and 1412 respectively). The Nasdaq had a worse session of it, down 0.4 per cent (2976) driven by a few stock specific issues. Otherwise the key sectors doing poorly are those expected to be impacted by Sandy – your health and insurance stocks. Home and construction stocks in contrast are getting a boost.

Now over in Europe events have become even more bizarre if that was possible. Twice now we’ve had announcements from Greek politicians, the PM this time no less, stating that a deal had been reached with the Troika. Last night the German Finance minister comes out and says that isn’t the case – although he’s very happy with progress to date. One major stumbling block was the apparent reluctance of Greek politicians to conduct any meaningful privatisations. So it’s noteworthy that the Greek parliament passed a bill that would make it easier for the state to offload public utilities.

It doesn’t look like this news really weighed on stocks that much though, and indeed political dithering doesn’t seem to be affecting Spanish and Italian bonds much anymore as well. I don’t think anyone doubts that Greece will get their cash – eventually. Anyway most of the damage to the European bourses appears to have occurred after the US open and the major indices all closed weaker – the Dax down 0.3 per cent, the CaC off 0.9 per cent, with the FTSE down 1.2 per cent.

Price action elsewhere wasn’t all that exciting. For forex, the Australian dollar was little changed at 1.0378. The euro initially had a solid boost through the European session hitting a high of almost 1.0320. Those gains were given back in the US session and in the end the unit was little changed (from 1630 AEDT) at 1.2964. The yen is otherwise at 79.83 while the British pound is at 1.6138. On the rates side we saw the 10-year Treasury note rally and the yield fall about 4bps to 1.696 per cent. The 5-year followed suit, falling 3bps to sit at 0.72 per cent, while the 2-year sits at 0.29 per cent. Finally and for commodities, we saw modest gains for the session with gold up $9 to $1721, copper rose 0.5 per cent while crude was up 0.5 per cent to $86.

Bits and pieces otherwise. In Europe, Portugal’s parliament passed a new budget consistent of tax hikes (largest ever) and spending cuts for 2013. The country is seeing the benefits of its efforts though as the countries' banks managed to tap the market for cash (without a guarantee) for the first time in two years.

Still in Europe, the unemployment rate rose to 11.6 per cent, from 11.5 per cent, which is the highest since the eurozone came to being. There were a few other indicators out as well; eurozone inflation was confirmed as being above target at 2.5 per cent (October)and German retail sales shot higher, rising 1.5 per cent in September after a 0.1 per cent rise the month prior. For the US we saw some minor manufacturing indexes – the Chicago PMI rose to 49.9 from 49.7 and the Milwaukie PMI fell to 43.3 from 47.1 – no major implications from this data.

Looking at the day ahead the SPI suggests the Australian market will slip a little (-0.1 per cent to 449), while Aussie debt futures did little – they were down a tick to 97.46 on the 3s and 96.945 on the 10s. Otherwise we get Australian trade prices at 1130 AEDT today. These aren’t market moving unless you see some pretty big moves either way – and their use is in determining, or helping to determine, upstream price pressure. That is, the likely or possible direction of broader inflation pressures in the economy down the track.

There are two more data pieces out today, only one of which is worth paying any attention to – the RBA’s commodity prices index series (1630 AEDT). Elsewhere, it’s worth looking out for two estimates of China’s manufacturing PMIs – one at 1200 AEDT the other at 1245 AEDT. The official estimate (at 1200) is the better of the two.

For tonight, and as mentioned, the ISM index is the key release and the market is fairly neutral in expecting little change (a modest fall to 51.2 from 51.5). In addition to that we see jobless claims, construction spending and the ADP employment report (sometimes used in forecasting payrolls – generally only if moves are big).

That’s about the lot, have a great day…

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