After what has been a solid month for equities and bond investors, month end flows have probably play their part in the price action overnight, US equities have lost momentum, UST have led a rise in core global bond yields and the USD is stronger. US and European inflation releases favoured the notion the Fed and ECB are done with their respective tightening cycles.
Markets Today: Big dollar getting a little bigger
Not a big night as far as market movements are concerned, one extension of a theme being the continued ascendancy of the big dollar that has gained a little more momentum, the Bloomberg spot dollar index up 0.12%.
Not a big night as far as market movements are concerned, one extension of a theme being the continued ascendancy of the big dollar that has gained a little more momentum, the Bloomberg spot dollar index up 0.12%. The big dollar notched up some gains against the Euro, Aussie, and Kiwi, the AUD down 0.38% and the NZD off 0.33%. Exceptions were the oil-driven currencies, the Canadian dollar steady while the Norwegian kroner rose, the NOK rising 0.49% with world oil prices recovering a little ground overnight.
The AUD sits at around 0.7020 in early trade this morning, at its overnight lows amid a choppy night for equities in Europe and the US, some decline in the S&P 500 VIX index, but softness in LME metals prices, copper down 0.78%.
The only data of note overnight was the US NFIB small business optimism index for October that was flat at 96.1 against expectations of a small rise. The dollar-supportive element of this report is that net compensation plans reported by US small business ticked a little higher, the net balance increasing from 16 to 17% the equal highest in this up cycle, a hint of a tightening US labour market, the sort of evidence Fed would be looking for the lead up to still likely December fed rate lift-off.
As we reported yesterday, the Portuguese government has now capitulated with the formation of the left wing coalition of parties. It remains to be seen whether this change of government reportedly on an anti-austerity platform will cause another bout of volatility as far as the Euro is concerned; it bears very close watching. So far at least, the Euro has been affected little, mainly on the back foot overnight but at the expense of the US dollar.
As we go to print, the RBNZ financial stability report is being released, warning about risks to the NZ economy from dairy and risks of a damaging correction in Auckland house prices saying that financial risks generally have increased. This has seen an initial break lower in the NZ dollar, losing 10-15 points but then steadying with the headlines not Kiwi-friendly.
There is some meaty potential event risk lies ahead today especially with the Chinese October monthly activity reports right near the top or list as far as Aussie dollar watches are concerned (1630 AEDT). In may well be that analysts are correct and that industrial production and retail sales growth coming in almost bang on the September outcomes, but we know that these monthly activity data tend to pick up the signals on the economy to a closer extent was often evident in the quarterly GDP report.
For the past three months, industrial production has been under-clubbing consensus expectations. The range of estimates is skewed to the lower end within a range of 5.6 to 6.1%; pricing is an estimate below 5.6% which is only 0.1% lower than September’s growth. We also note that yesterday’s CPI report was lower than expected.
Ahead of the Chinese growth numbers this morning, the may be some wire coverage from Chicago Fed President Charles Evans who is speaking at a debt management conference at 9:15 AM.
There is also the monthly Westpac–Melbourne Institute consumer sentiment survey (at 1030), conducted in the aftermath of the RBA leaving rates on hold (not that a cut was unit uniformly expected or something that would swing sentiment largely one way of the other in a predictable manner). Since today’s monthly sentiment measure was released last month, the weekly ANZ–Roy Morgan measure has been pushing higher. Either way we don’t expected to affect market pricing too much at all. Also later today, Japan releases its machine tool orders numbers for October (17.00 AEDT).
Tonight some Pound focus with the UK October labour market report as well as the BOE’s Mark Carney speaking (though on market reform), along with ECB President Draghi who is also speaking in London. There is no US data of note.
The NZD initially dips from RBNZ Financial Stability Report headlines: Eurostoxx 600 +0.1%, Dax +0.2%, CAC +0.0%, FTSE -0.3%. Dow +22 points to 17,752, +0.1%, S&P 500 +0.1%, Nasdaq -0.2%, VIX 15.55 -5.9%. Shanghai -0.2%, Mumbai -0.2%, Nikkei 225 -0.2% and ASX 200 -0.4%; ASX SPI futures this morning +0.1%. US bond yields: 2s at 0.86% (-2), 10s at 2.32% (-2). WTI oil at $44.24 (+0.8%), Brent at $47.50 (+0.7%), Malaysian Tapis (yesterday) $47.07 (-1.0%). Gold at $1087.40/oz (-0.1%). Base metals: LME copper -0.8%, nickel -0.8%, aluminium -0.3%. Iron ore $48.2/t +0.1% Chinese steel rebar futures -0.4%. Soft commodities spot futures: wheat -2.0%, sugar +5.1%, cotton -0.2%, coffee -1.2%. Euro CO2 emissions price (Dec 15) +1.4%. The AUD/USD’s range overnight 0.7019-0.7064; indicative range today 0.6995-0.7045; the AUD/USD is 0.7021 now
US NFIB Small Business Optimism Index (Oct) 96.1 (L: 96.1; E: 96.5)
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