Your morning market update includes some uplift thanks to the US and the end of an era.
– Stocks surged higher after the Republicans blinked and offered a 6-week extension to the US debt ceiling, which the White House called “encouraging”. The result was that the Dow has recovered most of its losses this month with a rise of 323 points or 2.18%. The Nasdaq was similarly ebullient and is up 2.26% while the S&P has broken back above the trend line it broke through earlier in the week, with a rise of 37 points (not a typo) or 2.21%.
– These are huge moves, but your author reckons this is just a can-kicking exercise as the Republicans have figured out they are being harmed by the shutdown and debt ceiling debate. However, if a deal can be done, and soon, then the impact on the US economy is lessened. But this deal doesn’t reopen the Government, so the negative impact drags on.
– Given it was a “risk on” night, markets all over the globe took their lead from the US news. European stocks rallied hard with the FTSE up 1.45%, the DAX rose 1.99%, the CAC was 2.2% higher while stocks in Milan and Madrid rose 1.54% and 2.35% respectively
– Besides USDJPY (98.21, +0.90%), the US Dollar didn’t get much of a lift from the news of the deal but the Aussie Dollar gained, rallying from a low of 0.9387 after the employment data yesterday. It’s now sitting at 0.9453, just back from a high of 0.9471. The Euro sits at 1.3530 and GBP is at 1.5977
– Rates came under a bit of pressure at the long end from the rally in equities and 10-year Treasuries moved up to 2.726% before closing back at 2.69%. Gilts lost 7 points, rising to 2.58%, while Bunds rose to 1.87%
– On commodity markets there was a bit of excitement as the Israeli Defence Force sent a Tweet about 1973’s Yom Kippur war mentioning Syria. It was misread by traders as relating to current events. At the close Nymex crude was 1.27% higher at $102.90. Gold fell $10 or 0.79% to $1297 while Copper rose 2 cents to $3.24 lb.
– Closer to home the SPI 200 contract on the Sydney Futures Exchange has rallied 61 points so it should be a good day on the ASX today. The 3- and 10-year bond contracts both rose 2 points, implying rates will rise by a similar amount today.
– The US debt ceiling olive branch, the big move higher in stocks and the Aussie Dollar’s move to 94.7 cents will get a lot airtime in dealing rooms today. The reality is the number one story for traders is likely to be the announcement last night of the retirement of the Little Master, Sachin Tendulkar. The other stuff will be far more boring for traders.
On the data front, there is nothing of note in Asia and then a raft of CPI data in Europe tonight.
Watch out for any comments relating to the deal, or at least the proposed deal, in the US.
Follow Greg McKenna on Twitter.