Yesterday’s bullish Asian session was wiped out overnight and left many Asian traders scratching their heads this morning. Data releases were thin, so it was range-trading during the session, albeit at lower levels than yesterday.
On the data front, Westpac’s reading of Australian consumer confidence rose in October as early-month RBA rate cuts spurred an increase in consumers’ willingness to considering entering the property market. The index rose 1.0 percent from a month ago, following on from a 1.6 percent increase last month, with the index tracking views on “time to buy a dwelling” rising to its highest level since September 2009. AUD traded flat on the session, straddling 1.02 with a slight upward tilt on a mild short squeeze midway through the morning.
Speaking at the IMF/World Bank conference in Tokyo, Fed’s Yellen repeated that low short-term US rates were essential to stimulate a recovery in the US economy and expectations of continued weakness were pushing longer-term rates lower. She expressed only one concern that an inherent interest rate risk still existed on banks’ balance sheets. While admitting that the Fed’s QE measures may have contributed to the volatile capital flows to and from developing economies, she asserted that this was not the only driving factor.
Yesterday was another good day for the US dollar as the US returned from its Columbus Day holiday. EUR felt additional pressure as Spanish yields ticked higher (though mostly a technical feature on 10-year benchmark rollovers), Greece’s Troika debt discussions continued and Draghi lamented the slow implementation of OMT. GBP also tripped below the 1.60 mark versus the USD for the first time since September 11 following weak production and trade data. Commodities traded softer amid the dollar’s resurgence but crude oil jumped on Middle East supply disruption concerns.
There wasn’t much in the way of US data to impact markets so it was sentiment from Europe that was the main driver. Wall Street closed lower with the DJIA losing 0.81 percent, S&P -0.99 percent and the Nasdaq -1.52 percent. Alcoa was the first to report Q3 earnings which, despite reporting a loss for the second consecutive quarter, were mildly better than analysts’ forecasts.
Data Highlights
- CA September Housing Starts out at 220.2k vs. 205k expected and revised 225.3k prior
- US October IBD/TIPP Economic Optimism out at 54.0 vs. 50.0 expected and 51.8 prior
- UK September NIESR GDP Estimate out at +0.8% q/q vs. revised +0.1% prior
- AU October Westpac Consumer Confidence out at +1.0% m/m vs. +1.6% prior
(All Times GMT)
- GE Wholesale Price Index (0600)
- JP machine Tool Orders (0600)
- Sweden Industrial Production/Orders (0730)
- Norway CPI/PPI (0800)
- US MBA Mortgage Applications (1100)
- US JOLTs Job Openings (1400)
- US Wholesale Inventories (1400)
- US Fed’s Beige Book (1800)