Markets Today: A minute of your time

The Sep FOMC minutes came and went and when all is said and done, it has not clarified whether the Fed is likely to be hiking before year end or later.

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The Sep FOMC minutes came and went and when all is said and done, it has not clarified whether the Fed is likely to be hiking before year end or later. As is quite often the case – and with some increased divergence of views – you could read into the Minutes whatever you wanted. Initial wire headlines were a combination of the various mixed threads: “many members see lift-off conditions met this year”, “several members concerned about downside risks to the outlook” and “members viewed risks to outlook as nearly balanced”.

All in all, the majority view is to expect that lift-off will happen in coming months – as we know from Yellen -but with plenty of caveats to hold off and wait. In that respect, low inflation remains a concern and the Fed is just not confident enough yet that inflation will head back to its 2% target over the medium term. One interesting snippet was a view from officials to let the jobless rate fall below full employment, not that this should be too surprising since according to the Fed’s pegging full employment in the low 5s/high 4s, they are already there. Inflation, EM volatility, net exports, and payrolls will be key. There is no more payrolls before the Oct 27-28 FOMC (announced early 29th our time), virtually ruling out lift-off then.

With the big dollar running into some headwinds recently, the market was looking for reasons to sell it lower and rightly or wrongly that was the initial but only short-lived reaction. It was the same for Treasury yields; net reaction there has also been neutral. US stocks did make some net post FOMC gains.

The AUD initially jumped from 0.7240 to around 0.7270, pulled back but holding on to most of those gains in a risk on mood still. With China back after its holidays, iron ore bounced back $2.83/t, retracing virtually of late last week’s mid holiday fall. Aussie and Kiwi have again been the stronger performers overnight.

Elsewhere, the BoE left rates steady as entirely expected, the voting remained at 8-1, sterling pulled back on a dovish outlook for delayed lift-off from the BoE, but much of this was retracing a rally into the meeting, sterling holding up overall.

US jobless claims were again on the low side, still keeping the market guessing on the mixed messages as far as the state of the US jobs market is concerned.

Coming up

After NZ credit numbers for September released at 8:45 AM, main focus in the AU housing finance approvals report for August will be on the investor lending figures and whether it reveals further signs of flatness. Headline owner occupied lending volumes are expected to have risen 6%, counter to the general trend of softer demand with this expected rise to be analysed to see whether it reflects simply greater refinancing activity or signs of a genuine pickup demand for housing finance from owner occupiers.

Tonight’s session sees more Fed speak, with Fed presidents Lockhart and Evans both speaking. Both are voters on the FOMC this year. As for US data, September import prices are likely to remind the market of the continuing deflationary impact prices from the strong dollar, sensors expect import prices fell another 0.5% in September 2 percent on year.

There could be some interest in the Canadian dollar tonight with the release of their September labour force report though if the data turns out as expected likely be some non-event, Canada’s unemployment expected to be steady at 7%. The BOC release their September quarter loan officers’ survey and the Business Outlook Survey, also for September quarter; no forecasts are available for either. USD/CAD is lower this morning, helped by the further incremental weakness in the $US.

Overnight

Stocks higher after FOMC: Eurostoxx 600 +0.2%, Dax +0.2%, CAC +0.2%, FTSE +0.6%. Dow +138 points to 17,051, +0.8%, S&P 500 +0.8%, Nasdaq +0.4%, VIX 17.54 -4.7%. Shanghai +3.0%, Mumbai +3.0%, Nikkei 225 +0.4% and ASX 200 +0.2%; ASX SPI futures this morning +1.2%. US bond yields: 2s at 0.63% (0), 10s at 2.10% (+3). WTI oil at $49.68 (+3.9%), Brent at $53.31 (+3.9%), Malaysian Tapis (yesterday) $52.02 (-2.1%). Gold at $1139.30/oz (-0.8%). Base metals: LME copper -1.0%, nickel +0.0%, aluminium -1.0%. Iron ore $56.0/t +5.3% Chinese steel rebar futures -0.2%. Soft commodities spot futures: wheat -0.9%, sugar +0.2%, cotton -0.5%, coffee 1.9%. Euro Dec 14 CO2 emissions at €8.13/t (0.2%). The AUD/USD’s range overnight 0.7169-0.77272; indicative range today 0.7225-0.7280; the AUD/USD is 0.7259 now

US jobless claims (w/e Oct 3) 263K (L: 277K; E: 274K)

Canadian house prices (Aug) 0.3% (L: 0.1%; F: 0.2%); Housing starts (Sep) 230.7K (L: 217K; E: 202K)

For full analysis, download report:
Markets Today: 9 October 2015 (PDF, 326KB)

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