Your morning market update, with taper talk preview and movement from Microsoft.
– It’s Taper time. After months of waiting the FOMC has begun its two-day meeting and we are less than 24 hours away from an expected first step back from super monetary accommodation by the Fed. Reuters reports that it has polled economists and market players and the expectation is for a $10 billion reduction in the current $85 billion in Fed buying each month, which gives us a benchmark to judge their actions tomorrow.
– But while there was some US dollar selling overnight, stocks don’t care in the least with the S&P 500 up 0.44% at 1705, the Nasdaq up 0.76% and the Dow was 0.23% higher. The big stock specific news was the announcement by Microsoft that it would increase its dividend by 22% and a $40 billion share buyback.
– In Europe, stocks were lower from 5-year highs on the Continent with the FTSE down 0.8% as the UK Government sold a stake in Lloyds. In Germany, the DAX fell 0.19%, pressured a little by auto sales. The CAC was 0.15% lower while stocks in Milan rose 0.11% and stocks in Madrid fell 0.08%.
– On Global FX markets, the Euro (1.3356) was up on the back of the better-than-expected ZEW economic survey and printed 49.6 from 42.0 in August, significantly above the 46.0 consensus forecast. GBP (1.5907) and Yen (USDJPY, 99.13) were little changed.
– But the Aussie has its mojo back, hitting a low of 0.9284 before a high of 0.9366 (currently 0.9354) – this is a break that will propel it higher and position squaring is likely if the it can hold these levels for a few more hours.
– On Commodity markets, Brent and Nymex fell on continued relaxation of Syrian tensions with Nymex Crude down 1.21% to $105.30, Gold is off 0.64% to $1310.20 while Copper is flat at $3.23 lb. Ags were quiet for a change, moving around 0.5%.
– Rates in the US were down 2 basis points, with the taper clearly tempering the positive reaction to the release of US CPI data for last month, which showed a rise of just 0.1% against 0.2% expected and 0.2% last. 10-year Treasuries closed 2.85% while Bunds were up a couple at 1.97% and Gilts closed at 2.76% up 5 points.
– Australian stocks today should open with a bid tone, with the SPI 200 futures contract up about 5 points on last night’s day close. Ten-year bond futures are off 3 points.
– On the data front, not much matters till 4am EST tomorrow, when the FOMC announces its decision, but that could make things a bit thin and whippy today. Of note, however, is the current account data in New Zealand, leading indicators in Australia, Chinese home sales and then tonight’s Bank of England minutes, construction output in the EU and building permits in the US.
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