Here's your 20-second guide to what Australian traders will be talking about this morning

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A quick recap:

China’s GDP data was very interesting yesterday. Our own David Scutt was on the money when he tweeted it would beat consensus by 0.1% to continue the trend of recent data. Ostensibly that meant the 6.9% print was “better than expected” and should have supported markets.

But stocks in Asia were confused. Shanghai finished a little in the red, the ASX went absolutely nowhere after gyrating either side of flat, Tokyo and Bangkok fell while Hong Kong and Seoul were just in the green.

The reason for the confusion is that there is an amazing level of distrust in the numbers which show that China is growing at its slowest pace since 2009 but still at a quarter on quarter rate. That had noted China watcher Patrick Chovanec muttering it was “all the more ridiculous, less believable”.

While that might be so, the fact that it wasn’t a terrible print was important for markets and traders. A weaker outcome would have seen markets in a funk as a result so whether you believe the data or not, this was a figure that at least supported stocks with the most of Europe, except the FTSE assailed by falling miners, in the green. Likewise, in the US, the Nasdaq closed up around 0.4% but the S&P 500 was flat and the Dow mildly positive.

In the end, traders on the ASX futures market last night have left the December SPI200 futures contract unchanged. If not for the pending release by prime minister Turnbull of the releases of the government’s official response to the Murray Financial Services Inquiry this morning before the market opens, it might have been a day for a long walk or a long lunch. But shareholders in bank and wealth management firms will be acutely interested in what the PM and his economic ministers have to say.

Forex markets hardly moved either. Save for the Australian dollar which initially rallied on the beat, the market was set for a weak Chinese GDP, but which has been slowly drifting since. Euro is a little lower after Australian central banker Ewald Nowotny once again said the EU needs more stimulus. That’s a theme the Sunday Times in the UK also picked up on yesterday saying Draghi will announce more QE at this week’s ECB meeting. Euro traders’ reactions have been very muted in this light, however. And markets aren’t keen on the prospective new government in Canada, as it is the biggest loser over the past 24 hours with traders awaiting the results of Monday’s election.

Commodity traders weren’t so keen on the Chinese data. Copper lost 1.4%, crude lost around 2.5%, but iron ore was up a little in US trade. Overall the CRB dropped 1.4%. No doubt OPEC entreating Iran to back off supply helped oil’s fall but the overall selling tone in base metals suggests there was more to the commodity weakness – China maybe?

On bonds last night, they managed to hold firm given that the NAHB home builders index showed that home builders haven’t felt this good since the housing bubble. That, along with employment, should be enough for a rate hike, but the continuing debate within the Fed (see in other news below) and worries about offshore have US 10-year rates holding just above 2%. Aussie 10s are at 2.60%

On the data front today, beside the FSI response in Australia, we have the minutes to this month’s RBA board meeting at 11.30am AEDT. German PPI tonight will be interesting in the context of this week’s ECB meeting and in the States tonight we get housing starts and building permits along with more Fed speakers.

The overnight scoreboard (7.37am AEDT):

  • Dow Jones Industrials +0.08% to 17,230
  • Nasdaq Composite¬†+0.38% to 4,905
  • S&P 500 +0.03% to 2,033
  • London (FTSE 100) -0.4% to 6,352
  • Frankfurt (DAX) +0.59% to 10,164
  • Tokyo (Nikkei) -0.88% to 18,131
  • Shanghai (composite) -0.11% to 3,387
  • Hong Kong (Hang Seng) +0.04% to 23,075
  • ASX Futures overnight (SPI December)¬†flat – 5237
  • AUDUSD: 0.7244
  • EURUSD: 1.1320
  • USDJPY: 119.51
  • GBPUSD: 1.5460
  • USDCAD: 1.3018
  • Nymex Crude (front contract): $46.09
  • Copper (US front contract): $2.37
  • Gold: $1,169
  • Dalian Iron Ore (January): 371.5 (denominated in CNY)
  • US 10 year bond rate: 2.02%
  • Australian 10 year bond rate: 2.60%

Other news:

The civil war at the Fed continues. Reuters reports that news broke last night that New York Fed president Bill Dudley told CorrierEconomia last Thursday – on the sidelines of a conference at the Brookings Institutions in Washington – that it’s too early to think about rate rises in the US because of concerns offshore. “It’s true we thought we could raise interest rates by the end of 2015, but turbulence on financial markets, modest global growth, energy prices and macro-prudential imbalances are slowing this process down.”

But his colleague, San Francisco Fed President John Williams, told Bloomberg TV that he sees “the time to start raising rates in the near future.” Williams said the Fed doesn’t want super low interest rates forever because “we’ve seen in the ’90s and 2000s, that when you get an unsustainable economy, that eventually things go wrong, so we want to avoid that”. Williams also intimated that my characterisation of a Fed civil war is incorrect. In answer to a question if Fed chair Yellen has a mutiny on her hands, Williams said absolutely not.

Perhaps, but mixed messages are still mixed messages.

In the old days, pre-QE, central banks used to be dampeners of volatility. Not anymore as their actions are both a driver of volatility and a consequence of that volatility. It’s a feedback loop that shows no end. To this end, I spied a great little article in the FT this morning about this circularity of the relationship between central bank monetary policy and financial market volatility. Elaine Moore says “the bind between markets and central banks is beginning to resemble the ouroborus, an ancient Greek symbol for eternity that depicted a serpent swallowing its own tail”.

Indeed it is. The Fed didn’t cut because of worries about “conditions abroad” and the performance of those markets since the decision has been strong. But, “rebounding markets are not the same as thing as recovering economies,” Moore says. Spot on.

“Eternity may be stretching it, but the volatility caused by markets watching central banks watching markets is not over yet.” So true.

And now from CMC Markets’ Ric Spooner is today’s Stock of the Day

Newcrest Mining (NCM.ASX)

After a steep rally, gold retreated below its 200-day moving average yesterday following a minor break above it that lasted only three days.

Gold miner Newcrest is due to release its production report this morning and also hit an interesting chart level last week. It peaked at channel resistance and the 38.2% Fibonacci retracement of the major decline from $29.96 to $6.92. If this peak is confirmed this week a pullback looks in prospect, perhaps back to around the 40-week moving average at $13.15 (green line on the chart below).

Ric Spooner, chief market analyst, CMC Markets

You can follow Ric on Twitter @ricspooner_CMC

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