Markets Today: The countdown

It was a contained night for markets, equities a little heavy for no apparent reason other than perhaps some nerves ahead of Thursday morning’s FOMC announcement.

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It was a contained night for markets, equities a little heavy for no apparent reason other than perhaps some nerves ahead of Thursday morning’s FOMC announcement. The German Ifo survey for October held up well considering the VW emissions scandal, the Ifo survey printing OK and having the pedigree and coverage across German business and suggesting growth continued through September, if a little slower. German stocks rose a little in a soggy European session.

Not so as far as UK manufacturing is concerned with the CBI trends survey for October printing much weaker than expected, the headline orders index the lowest since June 2013 and the export volume index the lowest since January 2013, another slice of evidence that the strength of the pound and softening domestic demand are weighing on local industry.

Neither the Euro nor the Pound were initially moved by either of these data points to any material extent, but when the US New Home Sales printed much lower than expected, coming also with downward revisions, that took a little heat out of the US dollar, sterling and the Euro a little higher overall without shooting the lights out.

The US housing sector to date has been one of the continuously shining growth stars, but this report on sales had analysts wondering about that star status. Also released overnight was another regional Fed manufacturing survey, this one from the Dallas Fed also still in contractionary territory, that region weighed down by the weakness in the energy sector. Also, the White House and the Congress seem to be getting closer to a deal to extend the debt ceiling with the November 3 borrowing limit date looming, removing one threat to market stability.

Oil prices were a little weaker still overnight, making energy stocks amongst the weakest performers on the S&P 500 in what has been a rather listless session overall. In the oil currency world, the CAD and the RUB both lost some ground against a somewhat softer USD, though the NOK was marginally higher.

The Aussie, after a disappointing session Friday night saw some support re-emerge yesterday in the wake of the Chinese monetary policy stimulus. It’s consolidated its position overnight, not breaking new ground on the top side and this morning trading at a little under 0.7250.

Coming up

Not a massive day as far as local and regional data is concerned with NZ trade and residential building reports unlikely to ruffle market feathers too much at all. The weekly AU ANZ-Roy Morgan consumer sentiment might be worth a look at 9.30 to see whether last week’s major bank mortgage rate rises struck a worrying chord with consumers. We also have Chinese industrial profits (L: -8.8%), not a market sensitive indicator, but some segments of Chinese industry have been at the forefront of the slowdown and thus headwinds for industrial earnings.

A larger night potentially looms as far as data is concerned. Sterling watchers will be closely attuned to the first cut of UK GDP and whether growth underperforms the 0.6% expectation, which itself is a step down from 0.7% in Q2.

In the US, durable goods orders and shipments will be gauged for what it says about US Business investment and growth for Q3 ahead of their advance estimate of GDP out Thursday. In that respect, the Atlanta Fed’s GDPNow estimate currently sits at 0.9%, shy of the market’s current 1.5% Bloomberg consensus. Case-Shiller house prices are also being released tonight as well as US consumer confidence, revealing not only what it says about confidence but consumer perceptions of the labour market; those perceptions have continued to improve.

Overnight

Markets contained ahead of FOMC: Eurostoxx 600 -0.4%, Dax +0.1%, CAC -0.5%, FTSE -0.4%. Dow -24 points to 17,623, -0.1%, S&P 500 -0.1%, Nasdaq +0.1%, VIX 15.29 +5.7%. Shanghai +0.5%, Mumbai +0.5%, Nikkei 225 +0.1% and ASX 200 -0.1%; ASX SPI futures this morning +0.1%. US bond yields: 2s at 0.63% (-1), 10s at 2.05% (-3). WTI oil at $43.79 (-1.8%), Brent at $47.38 (-1.3%), Malaysian Tapis (yesterday) $47.10 (+0.2%). Gold at $1163.70/oz (+0.1%). Base metals: LME copper +0.3%, nickel -0.6%, aluminium -1.1%. Iron ore $51.0/t -1.1% Chinese steel rebar futures +0.2%. Soft commodities spot futures: wheat +3.5%, sugar +2.5%, cotton -1.0%, coffee -1.0%. The AUD/USD’s range overnight 0.7243-0.7270; indicative range today 0.7210-0.7265; the AUD/USD is 0.7244 now

German Ifo Business Survey (Oct) 108.2 (L: 108.5; E: 107.5%); UK CBI Trends (Aug) -18 (L:-7; E: -9)
US New Home Sales (Sep) 468K/-11.5% (L: 552K/+5.7%; E: 550K/-0.4%); Dallas Fed manufacturing (Oct) -12.7 (L: -9.5; E: -6.5)

For full analysis, download report:
Markets Today: 27 October 2015 (PDF, 299KB)

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