Your morning market update looks a little bleak. Sorry about that.
– More red ink on stocks overnight as the S&P 500 broke down through its one-year uptrend line. This is a huge move for the market technicans who reckon it signals a much deeper sell-off.
– Of course the enduring catalyst for weakness is the US Government shutdown which has dragged into its eighth day, and even though President Obama urged Republican leader Boehner to “stop the excuses … let’s vote in the House”, the ring is still of partisanship. Particularly when he said he would negotiate only once the Republicans end the threats.
– So at the close, the Dow was down 159 points for a loss of 1.07%, the Nasdaq was down 2% and the S&P 500 fell a full 21 points for a loss of 1.26%.
– Continental Europe seems still somewhat sanguine about the troubles in US stock markets, with the DAX off just 0.41%, Milan down 0.27% and Madrid off 0.67%. In Paris the CAC fell 0.76% but it was only the FTSE in London that fell more than 1%, closing down 1.11%, but crucially on its lows. More losses beckon this afternoon when Europe opens.
– Closer to home, the SPI200 looks terrible technically and on the Sydney Futures Exchange the December contract fell 37 points. Over on interest rate markets, the 3- and 10-years only rose 1 and 1.5 points respectively.
– US 10’s rose just 1 point to 2.64%, Bunds were unchanged at 1.81% and Gilts were 1 point lower at 2.53%. This is all just noise but what is interesting – at least as a guide to risk appetite – is the move higher of 5 and 8 basis points on Italian and Spanish 10 year bonds respectively.
Shorter term though, the risk aversion had an impact on the US Treasury’s sale of $30 billion of 4-week bills, which went at a price of 0.35% and is being touted as “the highest rate in 5 years”. But frankly, big deal – if default was really a threat, no price would suffice. When these things are above 4 or 5%, then we’ll know the market is really worried.
– Forex markets, like bonds, were fairly quiet on a day-to-day close, but overnight the US dollar was hit before recovering. The Aussie rallied to a high of 0.9484, but is back at 0.9434 as I write, for a tiny gain on the day. Likewise, the Euro rallied to 1.3607 but is back at 1.3575, GBP (1.6086) hit a high of 1.6124 and USDJPY (96.95) hit a low (Yen strength) of 96.55 where the buyers were apparently lined up. At least this time.
– On Commodity markets, the weaker US Dollar saw Oil up 0.49% to $103.53, Gold unchanged at $1321 and Copper down a tick to $3.28 lb. Corn was at it again off 1.84%, Wheat fell 0.32% and Soybeans fell 0.66%.
On the data front today, we get Westpac Consumer Confidence at 11.30am in Australia, BoJ monetary policy decision is also out and tonight we get Industrial Production data for the UK and Germany.
There is also a 10-year note auction in the US and the Fed’s minutes to its recent meeting, both of which will be worth watching.
Follow Greg McKenna on Twitter.