Markets Today: On standby

Not a massive session as far as new market direction was concerned overnight ahead of payrolls tonight.

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Not a massive session as far as new market direction was concerned overnight ahead of payrolls tonight.  The US dollar sits fractionally a tad higher in net terms this morning, though not from any particular strength in the big dollar markets support or fed rate pricing.

It was a down session for the pound in the aftermath of the Bank of England unchanged rate decision, its quarterly inflation report and Bloomberg TV interview with its Governor Mark Carney. As entirely expected the Bank of England left rates unchanged with an 8-1 vote, with its quarterly inflation report suggesting that there is not enough CPI pressure to justify a rate hike for most MPC members, and that the outlook for global growth had weakened since August.  Despite their softer tones and outlook, to keep the market guessing, in his Bloomberg TV interview after the BoE decision, Governor Carney outlined his view that it would still be prudent to think that the Bank of England would be increasing rates year.

Most currencies marked time against the US dollar overnight. The Aussie this morning sits in very familiar territory trading just below nought 0.7150 in the aftermath of yesterday’s speech from RBA Governor Glenn Stevens which reaffirmed that if rates were to move it would be much more likely to be an easing for now at least he still harbours some concerns about housing, not knowing how successful or otherwise policy measures to cool some heated parts of the sector will be. The domestic form a little better of late as well.  Iron ore and copper prices lower overnight.

ECB’s Draghi was speaking, again talking about the stabilising deflation risks, that the ECB has a higher degree of independence and must consider the weaker global environment impacts its ability to return to price stability. Again, talking he’s talking up the prospect of ramping up QE/trimming its deposit rate at its December meeting. The Euro had something of an up-and-down and up night, whipped around by the above comments, softer than expected German factory orders but an upgrade to the European Commission’s growth forecasts.

It was very light on for US data with only the weekly jobless claims (and Q3 productivity after recent GDP). For once, jobless claims popped higher after the run of continuously low levels consistent with the stronger labour market. (Weekly noise or a late October wrinkle in the US labour market?) US fed funds futures backed off its December lift-off probability only a touch, down from 60% to 56%. Fed hawk Dennis Lockhart spoke on CNBC saying he expects the case for a hike in December will strengthen up to the December meeting, the improving US job market supporting lift-off this year. The more dovish Bill Dudley of the New York Fed said that in the current environment, he would like to see a little bit more in terms of wage inflation.

Coming up

Again, it’s another busy 24 hours as far as the schedule is concerned. First up today, the RBA releases its Statement on Monetary Policy, revealing some likely downward revision to its near-term inflation forecasts, if only from base effects and trimming its medium to longer term potential growth forecasts from slower population growth. As well the forecasts, the market will be looking for any nuances in the forward guidance as any influence over the market’s current pricing of December being unlikely and next February as possible to probable. (We continue to expect that the RBA will remain on hold for many months yet.) We also have Malcolm Edey RBA Assistant Governor (Financial System) speaking at noon AEDT at a property conference on the Gold Coast.

Then it’s all pretty much about payrolls tonight, with the likelihood of a print anywhere near close to expectations underpinning current pricing tilted towards fed rate lift-off in December. Is also even more fed speak night we James Bullard and Lael Brainard both speaking.

Overnight

Markets waiting for payrolls: Eurostoxx 600 -0.4%, Dax +0.4%, CAC +0.6%, FTSE -0.7%.  Dow -30 points to 17,837, -0.2%, S&P 500 -0.2%, Nasdaq -0.4%, VIX 15.64 +0.8%.  Shanghai +1.8%, Mumbai +1.8%, Nikkei 225 -0.4% and ASX 200 -0.9%; ASX SPI futures this morning -0.4%.  US bond yields: 2s at 0.84% (3), 10s at 2.25% (+2).  WTI oil at $45.24 (-2.3%), Brent at $48.00 (-1.2%), Malaysian Tapis (yesterday) $48.08 (-2.7%).  Gold at $1104.20/oz (-0.2%). Base metals: LME copper -2.4%, nickel -0.6%, aluminium +0.2%. Iron ore $48.7/t -1.0% Chinese steel rebar futures +0.1%. Soft commodities spot futures: wheat -0.3%, sugar +0.8%, cotton +0.0%, coffee 0.3%.  Euro CO2 emissions price (Dec 15) +0.8%. The AUD/USD’s range overnight 0.7126-0.7170; indicative range today 0.7120-0.7170; the AUD/USD is 0.7142 now

EC Retail sales (Sep) -0.1%/2.9% (L: 0.0%/2.3%; E: 0.2%/3.0%); German factory orders (Sep) -1.7%/-1.0% (L: -1.8%/1.9%; E: 1.0%/1.9%)

US Jobless claims (w/e 31 Oct) 276K (L: 260K; E: 262K)

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