SCOREBOARD: US precipice

Now that is much more like it! Here I was worrying that the fiscal cliff would come to nothing and bang – crude tumbles and stocks belted both sides of the pond. The fiscal cliff is being cited as the cause. It's only one night I realise and indeed moves only offset gains of the previous session. However, and as Eureka Report subscribers will be aware, I'm hoping it represents the first of many sessions ruled by the kind of outrageous hysteria to which we've become accustomed. Investors have to make money and the fact is these episodes always present a fantastic opportunity for an otherwise range bound Aussie market. So here's to hoping Congress can put on the best show the world has ever seen.

One of the biggest moves for the session was crude, down 5 per cent as I write to $84.3. Remember yesterday it was up about 3 per cent, so there is a base effect to consider, but either way it's a big move, involving fiscal cliff concerns as mentioned apparently, but the US Energy Information Administration also report that crude supplies rose by nearly 2 million barrels for the week – while gasoline and distillate supplies also rose. Outside of crude, the metals were mixed with gold up smalls ($4 to $1719), while copper fell 1.6 per cent. Some of it, as yesterday, USD related and the greenback received a solid bid. The big move was euro, off a big figure to 1.2763. Sterling then fell smalls (1.5984), while the yen is at 79.87. Not much for forex otherwise, the Australian dollar is down 50 pips or so to 1.0406.

This all obviously weighed on stocks and at the time of writing, energy and basic materials were among the key underperformers (noting all sectors were weaker with big falls in the tech and financial space also). The S&P was then down 2.1 per cent (1398), Dow about the same (12957), while the Nasdaq was off 2.2 per cent (2945). Our own SPI fell 0.8 per cent (4459).

Over in Europe, stocks traded weaker from the open and a report from the European Commission downgrading growth forecasts wouldn't have helped any. The EC now reckon that growth in the EU will be 0.4 per cent next year, down from their previous forecast of 1.3 per cent. Growth in 2014 is expected at 1.4 per cent. Now this isn't great and nor was German industrial production data which fell a stronger-than-expected 1.8 per cent in September after 0.4 per cent fall the month prior. But the offer wasn't really put on until the US session started. At the close, the Dax was down 1.96 per cent, the CaC was off 2 per cent and the FTSE lost 1.6 per cent. the rise in risk aversion saw Spanish and Italian bonds sell off a bit with the 10-year yields up about 4bps a piece to 5.68 per cent and 4.84 per cent respectively.

As for rates elsewhere, Treasuries rallied quite hard for a change. Most sessions there is only a few basis points here and there – if you're lucky. Last night, we saw the 10-year yield down 7bps to 1.62 per cent. The 5-year was down 4bps to 0.65 per cent while the 2-year was at 0.27 per cent. Risk off and all that, but there must also be a Bernanke element here. Mitt Romney had suggested he'd fire Bernanke if he won and many Republicans have rightly expressed a distaste for QE. So with the Fed still safely in the hands of a money printing extremist, down yields come. Aussie futures for their part rose about 7 ticks a piece – with the 3s at 97.42 and the 10s at 96.965.

Data wise there really wasn't much else to be honest. Protests continue in Greece, German Chancellor Angela Merkel wants plans drawn up for closer European integration and then eurozone retail sales fell 0.2 per cent in September after a 0.2 per cent rise the month prior.

As for the calendar today, it's best to look at the calendar I wrote up yesterday. It looks like I got my days confused, apologies. It was all the excitement of the US election – over so quickly. So it's actually today, of course, that the key Australian release is the labour force. Employment is forecast to be largely flat in October, while the unemployment rate is expected to lift to 5.5 per cent from 5.4 per cent. Remember these numbers are very volatile and really, anything could happen. Risks are very symmetric. Prior to that we see Japanese machine orders and trade data while tonight, the key focus will be on the ECB and BOE (no changes expected though). Otherwise German trade data is worth watching, while for the US, jobless claims are key.

Have a great day…