The main focus by markets ahead of Tuesday was no doubt the US Presidential Debate, billed as the showdown of the century. But as our title alludes to, that’s not what caught the market’s attention (and your scribe’s) which was better than expected US Consumer Confidence, now at its highest level since 2007. In short, consumers are Happy. Those figures helped propel the S&P500 0.6% higher and countered the negative lead from Europe (DAX -0.3%) which is being driven by speculation that Deutsche Bank will have to raise fresh capital in order to pay a rumoured $14bn fine to the US Department of Justice – that compares to its current market cap of €14.6bn.

First up the US Presidential debate. The market voted that Clinton won the debate with the FX weapon of choice for a likely Trump Victory – the Mexican Peso – recovering by 2.4%. A CNN poll of voters also has Clinton winning 62% against 27% for Trump. But as my colleague Nick Parsons points out, debate victories are not necessarily reflective of winners. In the 2012 Presidential race, only 20% of voters polled by Gallup believed President Obama had won his first debate with Romney who got 72% – as for the subsequent victor – Mit who….? No doubt markets will be sensitive to the next batch of polls.

In the FX space, the Euro fell 0.3% following the negative sentiment from German banks. Most major currency pairs were either flat or modestly higher with the Aussie, Kiwi, and Pound up 0.3-0.4%. Despite a fall in the oil price, the Canadian dollar was also marginally higher. WTI Oil fell 2.8% with any notion of an OPEC supply agreement being crushed by Iran. Iran stated it was unwilling to freeze output and wants to raise production to 4m barrels a day. The International Energy Agency also reiterated that supply and demand in the oil market won’t balance until 2017.

In terms of economic data, there was not a lot. US Consumer Confidence figures rose to 104.1 – the highest level since mid-2007. It’s the second straight surprise from the measure and perhaps signals that the US consumer is not being affected by the US Presidential Elections. Importantly for the jobs market, the proportion of people believing jobs are “plentiful” also rose to a nine year high and runs counter to the softness coming from the ISM surveys. Still the ISMs are unlikely to bounce much next week if the Richmond Fed Manufacturing Index is a guide – it was weaker than expected at -8, against expectations of -2.

US Treasury yields fell 2.4 basis points to 1.56% with strong US Consumer Confidence figures not having much of an impact on the bond market. German Bund yields were also lower, down 2.3 basis points to -0.14%. Comments overnight by Fed Vice-Chair Fischer may have also restrained the bond market. Fischer it appears remains undecided on raising rates, stating “I don’t want to raise the interest rate too much”…“I don’t know when that should happen”. Confused? Me too. Fischer clarified stating that “we’re beginning to see the fruits of a higher-pressure labor market [wages growth]” and keeping interest rates low has helped caused that. While wages growth has picked up to 2.5% a year, Fischer has nominated a 3% as a figure as “consistent with a reasonable rate of inflation”. For rates it appears the Fed Governors want to see evidence of inflation picking up before lifting rates again. Markets current ascribe a 54% chance of the Fed lifting rates at the December meeting.

Coming Up

US Fed Chair Yellen testifies before a House Panel on supervision and regulation. Her views after the split FOMC we be closely noted to see how close the Fed is to raising rates in December. If Fischer is to believed, the Fed needs to see inflation picking up before it’s willing to raise rates.

FOMC voters Mester (hawk, dissenter), George (uber-hawk, dissenter), and Bullard also talk later tonight. Mester and George both dissented and as such there is likely to be a few hawkish headlines. Given 3 out of 4 rotating regional fed presidents dissented and that was still not enough to get their colleagues over the line to hike, it’s probably better off watching the Fed Governors (particularly Yellen, Fischer and Brainard) for policy direction. Evans also speaks tonight, but is a non-voter.

Datawise there is not a lot of market sensitive releases apart from US Durable Goods Orders. We note that the Capital Orders Component has been very closely related to the oil and gas rig count in the US. The rig count has been creeping higher since June, broadly in line with the oil price. That’s also a reason why an agreement between OPEC is unlikely, as any upward movement in the oil price would likely see more US production being brought back online.

Other notable but not likely market sensitive data points include an RBA Speech by retiring Assistant Governor Edey, German GFK Consumer Confidence, and Draghi speaking to the European Parliament in a closed session.

Overnight

On global stock markets, the S&P 500 was +0.64%. Bond markets saw US 10-years -2.40bp to 1.56%. In commodities, Brent crude oil -2.98% to $45.94, gold-1.0% to $1,327, iron ore -0.2% to $56.63. AUD is at 0.7663 and the range since yesterday 5pm Sydney time is 0.7643 to 0.7693.

For full analysis, download report:

• Markets Today: 28 September 2016 (PDF, 202kb)

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