Your morning market update features the US dollar as the big loser.
– Another poor night for stocks but they recovered most of their weakness by the close, with the S&P 500 rallying 14 points from the low of 1680 to close down just one point at 1694. The Nasdaq fell 0.39%, however, while the Nasdaq mirrored the S&P’s recovery to close down just 0.08% or 3 points.
– The big news in the US was the miss by the ADP private employment survey which printed at 166,000 rather than the expected rise of 180,000. In the grand scheme of things it’s not that much of a miss but in the absence of official data – due to the government shutdown – it’s the best the market could get. But the initial weakness gave way to a firmer close as noted above.
– In Europe there was weakness in the FTSE, DAX and CAC, which fell 0.34%, 0.69% and 0.92% respectively, mainly on the back of the US shutdown and fears about its endurance but also likely the slightly more upbeat tone that permeated ECB Boss Mario Draghi’s post-meeting (non-change to policy) news conference. In Italy, however, stocks rallied 0.67% after Silvio Berlusconi backed down to avoid getting rolled by his colleagues, which meant that the Letta Government easily won the vote of confidence on the floor of Parliament.
– On Forex markets, the enduring shutdown seems to have had the biggest impact, with the US Dollar losing ground across the board in the past 24 hours. The Euro (1.3586) is up 0.46% and the ANZ reckons it’s going to hit 1.40. GBP is up 0.23% to 1.6229 while USDJPY has fallen 0.63%. That helped knock the Nikkei out of bed yesterday with a fall of 2%. The Aussie dollar is weaker by 0.15% at 0.9378, but this is up from the low of 0.9332. So it’s not a terrible result, even though it was the only major to lose against the US dollar.
– On commodity markets, Nymex crude rallied 1.75% to $103.83 Bbl, Gold had a big bounce of support and is up 2.69% at $1316 – reinforcing the fact that yesterday’s move looked like a position unwind. Copper bounced 4 cents as well to $3.31 lb which suggests that all these moves are really just reactions to a weaker US dollar. The Ags were quiet for a change.
– On rates markets, the US 10-year rate has rallied 3 points to 2.62%, UK Gilts were flat at 2.54% and Bunds were also largely unchanged at 1.81%.
– Closer to home, on the Sydney Futures Exchange the December Contract rose 14 points from yesterday’s day close to 5223, while on interest rate markets 3- and 10-year futures were up 2 and 1.5 points respectively, suggesting a fall in rates of the same magnitude on the physical market.
On the data front in Australia today we get the AiG PSI (services) report at 9.30am. The Australian economy is 75% services, so this is important. It’s a holiday in China and Germany but there is a raft of Markit Services PMI’s out today which we will be watching closely as well. EU retail sales are out and raft of US data is slated for release such as jobless claims, ISM non-manufacturing, construction spending and factory orders. With the shutdown in place, I only think ISM will be released.
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