Scoreboard: Taper prospects

Wall Street was barely affected overnight as taper talk continued to take centre stage.

After the excitement of Friday night, last night’s moves were a little more sedate, although I guess it’s meaningful that those gains were held. That in itself is something and it certainly highlights the strange underperformance of our market yesterday. But we have a sickness here that just won’t go away.

Not so in the US, the epicentre of the ‘Great Crisis’. Overnight, households there learned that their net worth rose nearly $2 trillion in the September quarter alone, to an eye-popping $77 trillion – that’s net wealth, net of their debt and liabilities. Seventy-seven trillion dollars. That’s 5.5 times GDP.

The equity component of that wealth didn’t appreciate much overnight, sure, but we are still looking at the best year for stocks in some time – 10 years or so. The 0.1 per cent to 0.2 per cent gain on the S&P500 (1808), Dow (16,040) and Nasdaq (4069) last night needs to be seen in that context I guess.

But there wasn’t a lot of market moving news otherwise. The talk of the town is still the taper and we got plenty of that last night. The Richmond Federal Reserve President Jeffrey Lacker (non-voter), while apparently opposed to the central bank bond-buying scheme, said he didn’t expect growth or employment to pick up appreciably next year; which is just as well because recent data shows both are already at a strong clip. He also said the Fed should be vigilant against disinflation, while not expecting it to be a problem himself.

The St Louis Fed president James Bullard (voter) said in contrast that the odds of taper had risen.

“Based on labour market data alone, the probability of a reduction in the pace of asset purchases has increased.”

But then again he’s been jumping all over the place in the last few months. Either way we are none the wiser, which is probably why the 10-year bond yield barely moved (at 2.85 per cent) – flip a coin.

In price action elsewhere, we saw gold up $10.5 to $1,239, copper rose 0.2 per cent and crude weakened – 2.2 per cent on Brent to $109.3, while WTI was up 0.2 per cent to $97.49. Otherwise in the forex space, the Australian dollar is a touch higher at 0.9110, the euro is 35 pips higher at 1.3740, and the yen sits above target at 103.23.

There were a few other things worth noting: German exports were 0.2 per cent higher in October, which is great because in September they surged 1.6 per cent. Similarly, imports were 2.9 per cent higher, offsetting a 1.9 per cent fall in the month prior. On the downside, German industrial production fell 1.2 per cent.

For the day ahead, the SPI suggests our stocks will be flat today, notwithstanding yesterday’s falls and ongoing gains abroad. Data-wise, we get NAB’s business confidence survey for November at 1130 AEDT; and while the rest of the world powers on ahead, we are wallowing. Home lending figures are also out at 1130 AEDT and outside of that there is a return of Chinese data. We get money growth this morning at around 11 AEDT and then this afternoon at 1630 (I think) we see Chinese retail sales, industrial production and fixed investment. Tonight we see UK industrial production and then for the US, wholesale trade.

Have a great day – get festive! Do good and help people, people.

Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.

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