Stocks in the US were a little lower and bonds climbed a touch after data showed US manufacturing bounced back from contraction in September.
That bounce back, and what it might imply about a Fed rate hike this year, helped the US dollar gain against the euro and yen while the pound was hammered by news that March looks like the date to trigger article 50 and a hard Brexit could ensue. But the Aussie dollar is back up near 77 cents as traders await today’s RBA decision.
Oil is up again, gold has collapsed below support, and iron ore is at a 3-week low.
But the wash-up is that futures traders are betting that it’s going to be a bad start to trade on the ASX today with the December SPI 200 off 22 points.
Here’s the scoreboard (7.51am):
- Dow: 18253 -54 (-0.3%)
- S&P 500: 2161 -7 (-0.33%)
- SPI 200 Futures (December): 5,442 -22 (-0.4%)
- AUDUSD: 0.7669 +0.0038 (+0.50%)
The top stories
1. The CBA is up first up today as Australia’s big bank CEOs have to front parliament. Ian Narev is likely to have been swotting away on the various angles that questions members of the House of Representatives, Standing Committee, Economics may throw at him in their annual review of Australia`s four major banks which begins today.
With relatively strong profits, questions over sales practices, and the recent troubles that Wells Fargo and now Morgan Stanley have associated with their business practices, the bank CEOs could face a torrid time.
Will it have any impact on share price expectations longer term? To my mind that depends on how the CEOs perform and how investors view the likelihood of further scrutiny. To that effect, Westpac CEO Brian Hartzer’s decision to get in front of the debate about front line commissions by announcing the end to the practice at his bank could stand him, and Westpac, in good stead.
2. RBA governor Lowe presides over his first board meeting today – no change is expected. 25 of 25 economists surveyed by Bloomberg don’t expect a change in RBA interest rates today. But the more important question for prices in Australia’s interest rate and currency markets is whether governor Lowe, in his first statement, will materially change the emphasis from his predecessor.
We’ll have coverage here at Business Insider this afternoon. But the key areas to watch are for any comments about employment, housing, inflation, and of course the Australian dollar.
Davisd Scutt has a 10-second guide to today’s announcement.
3. Deutsche Bank got hit by two other problems it doesn’t need right now. On Saturday morning, news broke that Deutsche Bank is being pursued by an Italian court for its dealings with Monte Paschi back in 2008. Bloomberg reports that the allegations relate to efforts by “Banca Monte dei Paschi di Siena Spa to falsify the Italian lender’s accounts”.
But that’s nothing in the current environment compared to Oscar Williams-Grut’s report that some Deutsche Bank customers were unable to get cash from ATMs on Saturday. Liquidity crises are largely those of the mind and this won’t help, even though it appears to have been just a simple IT glitch.
The wash-up was that even though Deutsche didn’t trade in Germany due to the public holiday, in New York trade, the bank’s stock price fell 0.84%. But that’s a great performance given it was down more than 2% at one point.
Oh and if you are wondering if the ECB cares about the impact of their policies on Deutsche Bank or anyone else, here’s governing council member Yves Mersch saying it’s just tough luck for the banks.
4. But Linette Lopez says the demise of Deutsche Bank is just another example of the disappearance of trust in finance (maybe the globe after the US/Russia shenanigans overnight). A financial institution has one real commodity that it sells – trust. That’s because the nature of banking, and the structure of its asset and liability mix means that if it loses the trust of its depositors and other creditors, there is virtually no way it can liquidate assets fast enough to repay all the money that’s called.
That trust is important was reinforced by the Deutsche Bank CEO recently when he said: “Trust is the foundation of banking…Some forces in the markets are currently trying to damage this trust.”
But Linette has a great post looking at the breakdown in trust across markets more broadly and what that means.
Oh, and look at the quote from Christopher Whalen, a senior managing director at Kroll Bond Rating Agency in Linette’s piece in the context of the debate about Australian banks. Just saying.
5. GOLDMAN: Big-money investors are dumping stocks at the fastest pace in years. How is it that stocks were able to climb to new record highs if this is the case? That’s a fascinating question that jumps out when you read Akin Oyedele’s report on Goldman research which says that during Q2, the big-money managers who pool assets for all kinds of investors dumped the stock market for a third straight quarter.
I can’t figure it.
6. China’s yuan officially joins the SDR. China has been rewarded for the relative stability that it’s currency, the yuan, has shown in the face of 2016’s turmoil with inclusion in the IMF’s synthetic currency basket – the SDR.
Reuters reports that each SDR will be made up of “0.58252 U.S. dollars, 0.38671 euros, 1.0174 Chinese yuan, 11.900 yen and 0.085946 pounds sterling”. These weights have been calculated over the past year and remain fixed for 5 years.
Elena Holodny has a little more on Chinese ebullience at being included here.
Key data for the past 24 hours (with thanks to BNZ markets)
AU: AiG perf. of mfg. index, Sep: 49.8 vs. 46.9 prev.
JP: Tankan large mfg index, Q3: 6 vs. 6 prev.
AU: Melbourne inst. Inflation, y/y, %, Sep: 1.3 vs.1.2 prev.
JP: Nikkei PMI manufacturing, Sep F: 50.4 vs. 50.3 prev.
GE: Markit manufacturing PMI, Sep F: 54.3 vs. 54.3 exp.
EZ: Markit manufacturing PMI, Sep F: 52.6 vs. 52.6 exp.
UK: Markit manufacturing PMI, Sep: 55.4 vs. 52.1 exp.
US: Markit manufacturing PMI, Sep F: 51.5 vs. 51.4 exp.
US: ISM manufacturing, Sep: 51.5 vs. 50.4 exp.