Another choppy night of trading with hints of risk-off still dogging equity markets and supporting bond markets, while commodities were non-directional with copper down marginally but other metals mostly rose, including the yellow metal.  Oil partially made up from yesterday’s falls.  And just now, the USD has risen after Yellen’s rate lift-off still in 2015 comments in a speech just hitting the wires, the AUD trading back down to and below 0.70.

Pre-Yellen, the best performer overnight was the NZD, up 1.22% in the wake of yesterday’s announcement from Fonterra increasing its payout, a hint to more confidence in the outlook for milk prices.  The AUD made some net gains above 0.70, after initially testing into the mid/lower 0.69s in the London and NY sessions.  At the other end of the currency spectrum, the Norges Bank cut rates by 25 bps to 0.75% (the consensus expected no change), unseating the NOK, USD/NOK up 2.44%, spiking higher after the rate cut announcement.

Getting a lot of wire coverage in US markets was the second revenue downgrade from Caterpillar in as many months, coming with job cuts as the oil and gas downturn bites into this key equipment supplier’s earnings.  Their stock fell 6.27%.

Data released overnight was important but did not significantly skew currencies and markets.  The German Ifo Business survey remained upbeat but came before the VW issues.  US durable goods orders were in line with expectations, as were jobless claims, while the one really strong growth stand out of the US economy remained housing with new home sales up 5.7%, higher than expectations. The Atlanta Fed’s GDPNow estimate for Q3 US GDP now stands at 1.4%, down from 1.5% as at Sep 17, still well below the Blue Chip consensus of 2.5%, though there is still key August and of course September data to come.

As we said above and as we go to print, Fed Chair Yellen speech is hitting the wires.  Scanning the headlines, her comments have a USD-supportive (though familiar) and that’s how the FX market has initially traded: she’s still saying lift-off appropriate later this year; outlook data dependent; below 2% inflation still likely due to transitory factors; strategy to tighten at gradual pace; most including myself expect 2015 lift-off; not far away from full employment; prospects appear solid.  .

Coming up today/tonight

Japanese inflation data is the main watch point this morning with the national CPI for August, Tokyo CPI for Sep.  National CPI is expected to be a point weaker at 0.1% but core ex-fresh food and energy CPI a point higher at 0.7%.  That’s all at 9.30.  There is also Japanese PPI at 9.50.

In Europe, it’s light on for data and events.  The ECB’s and Deutsche Bundesbank President Dr Jens Weidmann is at a Florence conference; overnight has was saying that the “exaggerated’ deflation fear has now receded, so no support for more QE.  In the US, Fed President James Bullard (a non-voter this year and next) is speaking; he said the night before that the Fed is playing “bad baseball” and that “inflation’s going to return to target and our policies are a long ways out of position compared to where we should be”.  There is a possible further revision to Q2 US GDP, that Markit’s version of the Services PMI and more importantly the UoM Consumer Sentiment preliminary reading for September’s Consumer Sentiment, the market looking for a small 0.8 point bounce after last month’s disappointment when sentiment in this survey fell nearly six points in the wake of equity market volatility; the alternative Conference Board measure follows the labour market more closely and it rose in August.

Overnight

AUD falls back to 0.70 as Yellen speaks: Eurostoxx 600 -2.1%, Dax -1.9%, CAC -1.9%, FTSE -1.2%.  Dow -79 points to 16,201, -0.5%, S&P 500 -0.5%, Nasdaq -0.4%, VIX 23.47 +6.1%.  Shaghai +0.9%, Mumbai +0.9%, Nikkei 225 -0.4% and ASX 200 +1.5%; ASX SPI futures this morning +0.0%.  US bond yields: 2s at 0.68% (-2), 10s at 2.13% (-2).  WTI oil at $45.10 (+1.4%), Brent at $48.31 (+1.2%), Malaysian Tapis (yesterday) $49.20 (+3.5%).  Gold at $1153.30/oz (+1.9%). Base metals: LME copper -0.1%, nickel +1.5%, aluminium +0.1%. Iron ore $55.3/t -1.6% Chinese steel rebar futures +0.5%. Soft commodities spot futures: wheat -2.1%, sugar +2.7%, cotton +0.6%, coffee 1.8%.  Euro Dec 14 CO2 emissions at €8.01/t (-0.9%). The AUD/USD’s range overnight 0.6938-0.7043; indicative range today 0.6995-0.7050; the AUD/USD is 0.6998 now

Germany’s Ifo Survey, Business Climate (Sep) 108.5 (L: 108.3; E: 107.9)

US durable goods orders (Sep) -2.0% (L: 1.9%; E: -2.3%); Jobless claims (w/e 19 Sep, payroll week) 267K (L: 264K; E: 272K); New Home Sales (Aug) 522K/+5.7% (L: 507K/5.4%; E: 515K/1.6%); Chicago Fed National Activity Index (Aug) -0.41 (L: 0.34; F: 0.24); Kansas City Fed Manufacturing (Sep) -8 (L: -9; E: -6)

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• Markets Today: 25 September 2015 (PDF, 307KB)

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