Your morning market update includes more taper talk and the potential US Government shutdown.
– Interesting data released in the past 24 hours with solid Manufacturing PMI in China (51.2 v 50.1 last) but somewhat disappointing results for France (49.5 v 49.7 last), Germany (51.3 v 51.8 last) and the US (52.8 v 53.1 last), all of which undershot expectations for a rise on last month. Service PMI’s were stronger, however, in Europe and the Composite PMI for the EU climbed to 52.1, which is a 27-month high. Developed-Emerging world re-rotation anyone?
– Also interesting is the ongoing debate about the Taper and the when and the if. Dallas Fed boss Richard Fisher thinks the Fed should have tapered because it had signaled its intention and shouldn’t lose credibility. But he lost that argument last week and the more important comments are those we heard from Bill Dudley of New York, who said “The economy still needs the support of a very accommodative monetary policy” and Dennis Lockhart of Atlanta, who said the economy is losing some steam.
– But stocks found no support in these comments because the focus has turned to the impact of the looming Debt Ceiling debate and potential Government shutdown. So at the close, the Dow was down 0.32%, the Nasdaq lost 0.26% and the S&P 500 was off 8 points or 0.46%% to 1702.
– In Europe, stocks were also lower with the FTSE down 0.60%, the Dax off 0.47% and the CAC down 0.75%. Stocks in Milan and Madrid fell 0.32% and 0.67% respectively.
– On FX markets the Aussie dollar (0.9443 +0.85%) was the only material gainer, buoyed by the HSBC Chinese PMI. Euro (1.3496) lost 0.36%, while the Yen (USDJPY 98.80) gained the same amount. GBP was marginally higher at 1.6049.
– The dovishness of Bill Dudley and Dennis Lockhart help US 10-year Treasuries rally 4 points to 2.70% which will please the Fed no end. Bunds closed down 2 at 1.92% and Gilts fell just 1 point to 2.73%.
– On Commodity markets, Oil continues its retracement, losing another 1.18% to $103.51 Bbl. Gold sits at $1322 oz., Silver at $21.70 oz. and Copper at $3.31 lb. On the Ags, Corn was up 0.55%, Wheat rose 1.20% and Soybeans fell 0.63%.
– Closer to home, prices on the Sydney Futures exchange overnight suggest the ASX will open weaker with the SPI200 off 23 points to 5241 while on the Interest rate futures screens, the 3- and 10-year bond contracts were both up 3 points, which implies rates lower by the same amount.
On the data front today, expect German IFO business Climate, Current and expectations is the main release, with nothing of note in Asia. Case-Shiller in the US tonight will be interesting and then we have another bevy of Fed speakers with Pianalto and George both speaking.
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