Your morning market update includes bad news for gold and Bitcoin.
– Taper talk for me is the key overnight, although not all markets got the memo, with the euro somehow rallying and stocks coming back from early weakness. Dennis Lockhart, the Atlanta Fed Governor and noted dove, said he thought inflation was too low but that the Taper might still be discussed next month. Indeed, there was a story to that effect on BI US overnight which is worth a look, because even though Lockhart said the data will be scratchy until at least December because of the government shutdown, that very same data has been quite strong.
– The primary market movers over the past couple of days as a result of taper talk have been USDJPY and the Nikkei, which closed 2.24% higher yesterday. The yen leads the Nikkei and NOT the other way around, as some seem to think, because the weaker yen (higher USDJPY) makes corporate Japan (or what’s left of it with anything attractive to sell) cheaper in US dollars and other currencies. 100 is a huge level and the high overnight of 99.79 is not too far below.
– In other FX markets, the Aussie drift lower continued with a low of 0.9268 but it is back at 93 cents this morning. What’s driving it is pretty easy to understand – US data has been stronger, the port in the storm that was Aussie is not needed if the US is doing well, so traders transition out of Aussie and back into US dollars. It’s not a safe haven, but increasingly the Aussie is becoming a safe harbour, which is something the RBA is going to have to get used to and learn how to mitigate. Perhaps stand in the market and sell into strength? Elsewhere, the euro rallied to a high of 1.3456 around 100 points above the low, which doesn’t make any sense given the low CPI (1.2%) and accelerating deflation in the PPI (-2.7%) in Germany. That is unless you look to the EURGBP rate, which rallied hard as GBP (1.5890) was slammed on the lower than expected CPI, which fell to 2.2%.
– Turning back to stocks and it was a pretty quiet night, reinforcing the overhead technical (huge) resistance in the S&P 500, which closed down 4 points or just 0.22%. It is still struggling for further topside impetus. On the Dow, the market was similarly quiet and the index is down 0.20% at 15,751. The Nasdaq was unchanged. There was some disappointing data in the sea of stronger outturns recently, with the NFIB Business optimism index falling from 93.9 to 91.6 in October, undershooting expectations by around 2 full points.
– Across the Atlantic, the FTSE was largely unchanged at 6,727, down just 1 point, the DAX fell 0.35% to 9,076 and the CAC fell 0.61% to 4,264. In Milan and Madrid, stocks fell 0.54% and 0.83% respectively.
– Closer to home on the Sydney Futures Exchange, the SPI 200 contract is down 18 points to 5393 bid.
– On commodity markets, Bitcoin looks like it has made a double top. Who would own it now that we have had one repository hacked a couple of weeks back and then the news broke overnight that a Chinese exchange holding $4.1 billion has disappeared? It sits at 367 at the moment.
– Elsewhere, Crude fell 2.13% to $93.11 Bbl and Gold fell heavily into the $1260’s to sit at $1267 at the moment, down 1.1%. Silver lost 1.53% to $21.37 and intriguingly, Copper lost another 3 cents to $3.22 – watch for a deeper break if $3.20. Corn fell 0.69%, Wheat was off 0.15% and Soybeans rose 0.86%
On the data front today, the Westpac Consumer Confidence is out in Australia, but before that there is likely to be some interest in the RBNZ’s Financial Stability Report and what they say on housing and the Australian Majors’ place in the Kiwi housing market. In the UK we get the unemployment rate, but much more important is the Bank of England Inflation Report and a speech from BoE Governor Carney. German Bundesbank President Weidmann is also talking, but there is nothing in the US of note.