For most of the session, US stocks weren’t doing all that much, trading within a narrow range just above zero. Indeed, markets even brushed off news that durable goods orders slumped 7 per cent in July (after a 4 per cent increase in June). That’s a pretty big fall, mind you – the biggest in roughly a year, and one that would normally spark some kind of reaction. I mean, even core orders (which are less volatile) fell about 3 per cent.
Whether it was a general view that orders are too volatile to give a meaningful signal, with only one month’s data, or confusion over what it might mean for QE, stocks didn’t react. In fact some hours later they hit their high (S&P500 up 0.3 per cent). Overlaid with all that is the northern summer holiday I guess, and volumes were low.
Now, US equities did close in the red (S&P500 and Dow off 0.4 per cent to 1656 and 14,946 respectively), but the offer didn’t really come on till pretty much the last hour of trade. I can’t really pinpoint any reason for it. Certainly the US rhetoric on Syria is more aggressive and people who know about such things suggest a US attack is imminent.
Last night, the US Secretary of State John Kerry said that Syria would be held accountable for the moral obscenity of using chemical weapons against its own people – and it is a moral obscenity, if it’s true. And this is a point Russia has raised: is it true? Do a handful of video clips actually amount to evidence?
In highlighting this, the Russian foreign minister said that Russia wouldn’t engage in hostilities if anyone did attack Syria, but that it would be a “serious violation of international law”. Now, that comment may indeed have helped the offer build, but then crude actually fell for the session (-0.2 per cent to $106.2), and while gold rose, it was only up about $8 or so to $1404. War thematics generally see more action here.
Similarly, there wasn’t a lot of price action elsewhere. In the forex space, the Australian dollar is little changed at 0.9024 (60 pips range), down smalls from 1630 AEST. Similarly, the euro is at 1.371, or little changed, and the yen is at 98.45. Finally, the US 10-year bond yield was off 3 bps to 2.79 per cent.
News and data was otherwise light. In the US we saw the Dallas Fed manufacturing index rise to 5 from 4.4, while in Europe, the head of Germany’s Bundesbank said that it wasn’t his expectation that rates would be held low for years, citing the fact that monetary policy eventually loses its effect over time (unless you make the mistakes the Fed has by continuing to provide another fix to the market) and poses risks to financial stability.
That’s probably about it. For today then, the SPI suggests our market will fall 0.6 per cent. Chinese industrial profits are out at 1130 AEST, but that’s pretty much it for our session. For tonight it’s worth watching the German IFO survey, US house prices (S&P/Case-Shiller), consumer confidence and the Richmond Fed manufacturing index.
Have a great day…
Adam Carr is a leading market economist.
Follow @AdamCarrEcon on Twitter.