– Is the fact that the US Fed issued 10-year notes above 3% for the first time since May 2011 last night the most important driver or is it the Minutes which showed that the FOMC seems to have only a href=”http://www.businessinsider.com.au/fomc-minutes-december-meeting-2014-1″>reluctantly Tapered at the December meeting with discussions about how to communicate the language around it key?
– Equally important though was the big upward surprise in the ADP employment report which printed 238,000 in December, way through the 200,000 expected. This data augurs well for a strong non-farm payrolls report Friday night in the US, which has contributed to the US dollar strength against the euro, yen and Aussie dollar.
– In other data releases, the Italian unemployment rate hit a 37-year high of 12.7% and youth unemployment remains well through 40%. Markets are buying Spanish and Italian debt again but data like these just highlight that the heavy lifting in the eurozone is being done almost exclusively by Germany. Having said that, EU-wide retail sales were quite strong last night, printing up 1.4% in November against expectations of just 0.2%. German factory orders were also stronger at 2.1% in November against expectations of 1.5%.
– The wash-up of all of the above was that at the close the Dow is off 71 points or 0.43% to 16,460, the Nasdaq bounced 0.4% in the last 10 minutes to close up 0.31%, while the S&P ended the day down just 1 point at 1,837.
– On European Bourses, the FTSE opened lower and continued to drift into the close, losing 0.5% to 6,722. The DAX, however, did much better, losing only 0.09% with CAC dropping just 0.04%. In Milan, stocks fell 0.17% but in Madrid, traders took stocks 0.74% higher.
– Closer to home on the Sydney Futures Exchange, the March SPI 200 contract is off 9 points to 5275 bid. On the bond boards the 3’s have fallen 6 points (implying rates higher) and the 10’s have lost 4.5 points.
– On forex markets, the Aussie has tested below 89 cents again with a low of 0.8892 but the thing to note here is that this was after a high of 0.8951 earlier in the night when the sellers entered once again. It sits at 0.8910 this morning. The euro likewise made a high of 1.3635 before the ADP report and is off 0.3% this morning at 1.3574. GBP rallied 0.26% to 1.6445 while USDJPY is up 0.21% to 104.80.
– On commodity markets, Gold is down again and has largely filled the gap back to $1215 from earlier in the week when the market had its mini-crash. It’s currently down $4.10 to $1,222.30 oz. But in many respects Nymex Crude is the big news in commodity markets and at $92.54 Bbl, it has now broken the uptrend from the 2008 and 2012 lows. Copper lost a couple of cents to $3.39 lb while on the Ags, Corn and Wheat were smashed, losing 2.70% and 2.61% respectively. Soybeans were largely unchanged.
On the data front, in Australia today we see building and retail sales data and the ABS is releasing online sales, which will be interesting. In China we get CPI and tonight, trade data out of France and the UK. EU-wide business sentiment is out along with German industrial production. But it is the BoE and ECB rate decisions which will be the key drivers. As Europe heads toward deflation, will the ECB do something surprising?
In the US, it’s intial jobless claims and the challenger job cuts in the lead-up to non-farm payrolls on Friday.