– A huge night for markets but if ever there was proof that the world is too complacent and may be different when the Fed actually raises rates, this was the night. US GDP surged back to the pink of health in Q2 2014, growing at an annualised rate of 4% – that’s huge!
– Stocks sold off initially and the US dollar was stronger while 10-year US Treasuries leapt a massive 10 points to 2.56% for a loss of 4.01% in capital price terms.
– But after the Fed stayed the course on taper and interest rates – with the exception of lone dissenter Charles Plosser who wants more aggressive action – stocks in the US recovered, the US dollar weakened a little and the bond sell-off slowed.
– What is remarkable about markets when viewed through this prism is that even though there will be revisions, possibly downward, to this growth rate, the euro is still hanging on to 1.34, the VIX is still quiet and the S&P is still close to all-time highs.
– Either this is a monstrous bullish sign for stocks or there is a huge surprise coming. Traders will be busy this morning trying to figure things out.
– Anyway, at the close, the Dow fell 32 points or 0.19% to 16,880, the Nasdaq in contrast rose 0.46% and the S&P 500 recovered from a low at 1,962, closing flat for the day at 1,970.
– It was very different on European markets, which were playing catch-up to the previous day’s US moves and the earlier US sell-off. The FTSE was down 0.51% to 6,773, the DAX dropped 0.62% and the CAC collapsed 1.23% to 4,312. Stocks in Milan fell 0.93% and Spain continued its remarkable recovery with the IBEX 35 up 0.33%.
– In the ASX SPI 200 futures trade overnight, the September contract is up 1 point to 5578. That’s solid after yesterday’s rally and break and hold above the ASX200 physical market which closed at 5622.
– In Asia yesterday, there was another blow for Abenomics with the industrial production data for June falling much more sharply than expected, down 3.3%. It didn’t hurt the Nikkei though, focused on the USDJPY above 102, which closed up 0.18% to 15,646. The Hang Seng rose 0.37% while stocks in Shanghai were a smidge lower, losing 0.1% to 2,181.
– On Currency markets, the Aussie was hit the hardest overnight, suggesting – to me at least – that RBA governor Stevens is going to be right about an Aussie dollar fall once the Fed starts raising rates. The battler lost 0.6% to 0.9327 this morning after a low of 0.9302 last night. USDJPY was another big mover on the day and is up at 102.82 after that production data reinforced some weakening in Abenomics’ positive economic impact. Euro fell to 1.3365 at one point but sits at 1.3392 while sterling continued to drift to a low of 1.6887 before recovering to 1.6915.
– On Commodity markets, Iron Ore for September delivery dipped 50 cents a tonne to $95.25. Newcastle Coal lost 60 cents to $69.75 tonne.
– The price of Nymex Crude is baffling from a distance. With everything going on and the halting of the Kurdish export of oil you could surmise that prices might rise. Happily, however, for the global growth profile in the future – or perhaps unhappily for where it is now – Crude dipped another $1.45 Bbl back below $100 to $99.52. Gold lost a few bucks to $1,295, Silver settled at $20.55 oz and Copper dipped 2 cents to $3.23 lb. On the Ags, Wheat bounced 1.39%, Corn was virtually unchanged and Soybeans dipped 0.49%.
Datawise today in Australia we get building permits, export prices and private sector credit. Tonight is important for the euro with the release of German unemployment and EU CPI. A night before non-farms, the Challenger jobs report will be important.