With the whole of North America on holiday (albeit US stock markets were open) it has been a predictably quiet night. Currencies have again proved to be somewhat livelier than stocks or (European) bond markets, though yields have pushed lower in the latter while US stocks are eking out small gains into the close. Earlier European stock finished mostly in the red, albeit only down smalls.

In currencies it is again the NZD and AUD that feature at the top of the G10 leadership board (in AUD’s case matched by the Swedish Krone where both are up 0.33% since Friday). NZD has punched back above 0.67 having languished just below for much of Monday’s local session (high of 0.6740) while the AUD has made new highs on this run-up from 0.6937 since 29 September, printing 0.7382 and which leaves it currently sitting on its 100 day moving average. We should be prepared to see it trade on to a 0.74 handle this week if not later today depending in particular on what the latest China trade data brings and bearing in mind that the RMB is continuing to strengthen. USD/CNY is down 0.34% since Friday.

Fed-speak has again been thick on the ground. Atlanta Fed President Dennis Lockhart downplayed the impact of China’s slowdown on the US though did admit a link via the negative impact of China on Europe. He re-iterates that the October (29th) meeting is ‘live’ and says markets appear to be misaligned with the Fed over ‘lift-off’ before going on to say he doesn’t think it is too series.

Chicago Fed President Charles Evans now has mid-2016 as his preferred lift-off date and repeats what he said at the weekend, that a sub-1% Fed Funds rate may be appropriate by end-2016. In September 2013 Evans wanted no rate hike until late 2015; in March 2015 not before early 2016, and now he thinks mid-2016 is best. Watch this space.

Also to note is that oil has had a really bad night with Nymex and Brent crude both off over $2 on news that OPEC production just hit a new 3-year high.

Coming Up

Today promises to be the biggest day of the week, with China trade data, the NAB business survey,
RBA deputy governor Phil Lowe speaking (08:40 AEDT) and JP Morgan, Intel and Johnson & Johnson among the US firms reporting their 3rd quarter earnings.

Survey expectations for the September China trade data show a median expectation for a further deterioration in both exports (-6.0% y/y from -5.5%) and imports (16.5% from -14.3% in August). Outcomes better than expected could help perpetuate the recent strong rally in EM Asian currencies and the AUD, while worse than expected outcomes can stop the rallies dead in their tracks, at least temporarily.

NAB’s August business survey showed business conditions lifting to 11 from 6 while confidence fell to 1 from 4. One particular point of interest today will be whether the Liberal leadership spill and ouster of Tony Abbott in favour of Malcolm Turnbull as PM had any perceptible impact on business confidence.

RBA Deputy Governor Lowe’s speech, to the CFA institute’s Australia Investment conference, is titled ‘Fundamentals and Flexibility’.

Ahead of the aforementioned US earnings reports, we’ll get the US NFIB Small Business Optimism survey (for which we have already had the Hiring Plans Index ahead of the non-farm payrolls report – down to 12 from 13 in September) and the German ZEW survey. The latter should give us the first read on the impact on business sentiment from the VW diesel emissions scandal. Falls in both the Current Situation and Expectations readings are expected.

Also due tonight are latest inflation read-outs from the UK, where headline CPI is seen sticking at 0.0%,and final numbers from Germany also expected to have held at the 0.0% preliminary y/y rate. The latest from ECB President Draghi on inflation in the Eurozone, over the weekend, is that oil prices are largely to blame for the likelihood of it taking longer for inflation to come up to the ‘near 2% target’, with no enthusiasm at this stage to be fuelling hopes for more aggressive easing.

James Bullard is tonight’s featured Fed speaker.

Overnight

• On global stock markets, the S&P 500 is currently +0.1%. US bond markets were closed, while 10yr German Bund yields fell by 3.8bps to 0.576%. On commodity markets, Brent crude oil -5.05% to $49.99, gold+0.5% to $1,162, iron ore +1.1% to $56.61. AUD is at 0.7362 and the range was 0.7305 to 0.7382.

For full analysis, download report:

•   Markets Today: 13 October 2015 (PDF, 378KB)

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