Markets Today: Comin’ back soon

This Fed meeting came with no press conference and updated forecasts for this meeting; that next comes at the December 15 meeting.

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The Fed has, as expected, left the Fed funds rate unchanged and without any overt reference to December as “on”.  Not that a specific time reference was expected, data dependency and market developments still the ultimate drivers, including the aftermath of the Presidential election.  We are still inclined to the view that the Fed will lift rates in December, subject of course to the data flow and market developments.  Markets overnight have continued to tilt toward risk-off, equities lower, bonds getting support and the USD losing some traction, especially against the yen.  Gold is higher too.  Oil is weaker, WTI testing $45, (currently $45.49) and with Brent current off 2%-plus for the session on news of higher inventories, also weighing on sentiment.  The AUD continues to trade in the mid 76s, recovering after losing some traction in the wake of yesterday’s underwhelming September building approvals report.

This Fed meeting came with no press conference and updated forecasts for this meeting; that next comes at the December 15 meeting.  So all the concentration is on the Statement that again noted that the case for a rate rise has continued to strengthen but the FOMC decided to wait for some further evidence of continued progress.  The words “continued to” were added in this time before “strengthen” while “some” was also inserted before “further evidence” this time.  Now waiting for “some further evidence” rather than just “further evidence” could be interpreted as a little more time specific, a hint of December perhaps.

The Statement also recognised that market-based measures of inflation compensation “have moved up” rather than remain low.  Against those, the Statement though did dial back its description of household spending from “growing strongly” to “rising moderately” but against that recognised that.  There was one less dissenter this time, only two, George and Mester, Rosengren going with the flow this time.

US Treasuries have been bid given the risk-off mood, 2y yields off 1.4 bps to 0.817% and 10s at 1.795%, down 3.2 bps.  Neither benchmark yields have changed much since the FOMC announcement.  And the market continues to price in an over 70% chance of the Fed hiking in December, at 72.8%, unchanged since the FOMC.  Gold is over $1300/oz.

Coming up

Australia’s trade report for September will give the market pause for thought and reflection given how rapidly bulk commodity prices have been accelerating and China’s relative economic growth stability.  The market is looking for an improvement to $1.7bn from the $2bn August figure. NAB is slightly weaker than the consensus in expecting an unchanged figure. On this we note that the recent surge in coking coal prices is unlikely to be picked up by the data until the October figures. The RBA’s Commodity Price Index in September did rise 2.5% in $A terms, imparting an upward bias to export receipts, but Port Hedland iron ore loadings declined 2.4%, while coal port loadings seemed to rise somewhat.

There is also the AiG PSI Services report first thing this morning, along with the ANZ Commodity Price Index for NZ (11.00 AEST) and the private sector Caixin China Services/Composite PMIs for October at 12.45pm AEST.  The UK also publishes its Services PMI tonight ahead of the US ISM Non-Manufacturing report that’s expected to only ease slightly to a still healthy 56.0 from 57.1.  Q3 US preliminary productivity/unit labor costs data is due, as is weekly jobless claims, and factory orders.

With UK activity holding up, the Bank of England is expected to keep their powder dry with rates and QE on hold.  There’ll be as much interest in the Bank’s views on the economy and rates in their Quarterly Inflation Report.

Overnight

On global stock markets, the S&P 500 was -0.43%. Bond markets saw US 10-years -3.02bp to 1.80%. In commodities, Brent crude oil -2.14% to $47.11, gold+0.9% to $1,299, iron ore -0.0% to $65.31. AUD is at 0.7656 and the range since yesterday 5pm Sydney time is 0.7626 to 0.7677.

Good luck.

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