Good morning! And fingers crossed for Philae…
– Central Bank governors have changed a lot in the 25+ years that I been involved with financial markets and trading. The GFC has thrust them into the limelight in a manner most are uncomfortable with as governments of various stripes around the world were unable to cope with the scale and speed of the near-death experience that Lehman caused. Six years later Yellen, Draghi, Kuroda and Mark Carney at the Bank of England are still driving the bus of global finance.
– Last night in delivering the BoE’s quarterly inflation report, Governor Carney painted another gloomy economic picture for Europe saying “spectre of economic stagnation” is haunting Europe. Specifically in the UK, he said inflation would float down toward 1% which speaks of the UK’s own economic challenges and has pushed out any chance of a rate hike into the ether.
– It’s a big deal and sterling was smashed lower from a 1.5940 high yesterday to sit at 1.5783. It’s also a big deal because while stock traders are goosed by free money and the S&P and Dow are up at all-time highs, globally the economic recovery has faltered – else Draghi would not need to encourage the ECB to buy ABS, Kuroda would not need to be dropping even more money on a stagnant economy and Carney would not be talking about inflation at 1.1%. That’s a slow growth, weak aggregate demand world, free money or not.
– In the US then, stocks drifted sideways in a fairly tight range and with 10 minutes to go before the close the Dow is up 4 points at 17,619, the S&P 500 is off just 1 point at 2,039 but the Nasdaq is up 0.35% at 4,676.
– In Europe, even though Draghi reiterated the ECB’s plans for QE and EU, IP was solid with a print of 0.6% (0.7% expected) but stocks fell as tensions in Ukraine grow again. The banks were pressured as well after US, Swiss and UK regulators fined a number of banks over some FX rate-set shenanigans. At the close, the FTSE was down just 0.25% to 6,611 but continental stocks were sold heavily. The DAX dipped 1.69% to 9,211, the CAC was 1.51% lower at 4,180 while stocks in Milan and Madrid fell 2.87% and 1.76% respectively.
– Locally, traders on the ASX took the SPI 200 December futures contract down 7 points to 5,481 while March was 5 lower at 5,440. It’s a market that feels heavy at the moment after yesterday’s 1% loss on the physical so I’ve a bias lower.
– In Asia, Shanghai was up 1% to 2,494, a three-year high, after the HKMA dropped the conversion limits of RMB 20,000 for domestic residents effective next Monday. HSBC said this was expected “ahead of the Shanghai-Hong Kong Stock Connect going live on 17 November 2014.” But it also speaks of liberalisation of Chinese capital markets,and the RMB in particular, so it positive for Shanghai and investors wanting to get to mainland Chinese companies. It’s through the level we highlighted a couple of days back and Shanghai 3,000 seems a fair bet over a 12-month time horizon.
– Elsewhere in Asia, the Nikkei had an up day (+0.43% to 17,197) but futures are down as talk of a snap election was pooh-poohed by the Government, putting the cancellation of the sails tax increase on the back burner. In Hong Kong, stocks rose 0.54% to 23,938.
– On Bond markets, the slow drift in US stocks continued and the 10s closed at 2.37%. Bunds rallied 2 points to 0.77% and UK 10-year gilts finished at 2.19%, down 5 points after Mark Carney’s inflation report.
– On Forex markets, the Aussie is well bid and rallied to a high of 0.8744 overnight and sits at 0.8715 this morning up 0.36%. The yen was a little stronger, also up 0.2% as USDJPY dipped to 115.53 (I reckon its headed lower) but the euro and sterling were lower.
– On Commodities, December iron ore was unchanged at $75.25, Newcastle coal rose 15 cents to $63.70 a tonne. Nymex crude dipped 1.46% to $76.80 and gold is at $1,157 an ounce. Copper is roughly square at $3.028 while on the Ags it was wheat’s turn to have a stupendous move and it is up 3.3% this morning. Soybeans dipped 1.52% and corn rallied 0.94%.
On the data front, we get consumer inflation expectations here in Australia and I’d bet the RBA wants Australians to still think inflation is heading up. In Japan, we see machinery orders and corporate good prices. New loans are finally to be released today in China along with industrial production and retail sales.
German, French, Spanish, Italian and Swiss price data is out in Europe tonight while int he US we get jobless claims.