By Greg Peel
The Dow closed down 7 points while the S&P gained 0.4% to 1652 and the Nasdaq added 0.4%.
"On balance, with growth expected to remain below trend for longer and inflation to remain within the target even with the effects of a lower exchange rate, members concluded that a lower level of the cash rate would better contribute to achieving sustainable growth in demand consistent with the inflation target. Regarding the communication of this decision, members agreed that the Bank should neither close off the possibility of reducing rates further, nor signal an imminent intention to reduce rates further. The Board would continue to examine the data over the months ahead to judge whether monetary policy was appropriately configured."
So said the minutes of the August RBA meeting, released yesterday. From this we can conclude, firstly, that our own central bank is joining in the new trend among developed world central banks to provide more disclosure, more "communication", to markets in order to contain speculative volatility. It doesn't much seem to work. Otherwise, the minutes told us not much more than was suggested in the August statement, being that the door is still open for another rate cut but it will depend on the data in "the months ahead", which rather rules out September one would assume. Notwithstanding that the September meeting is on the third and the election on the seventh.
Bridge Street finally succumbed to the pressure of a weaker Wall Street yesterday, although it took a few disappointing corporate profit results to snap an otherwise positive mood to date. (See: FNArena Reporting Season Monitor). We did not, nevertheless, suffer one of those snowballing tumbles we've come to fear, with the Aussie heading back towards 90 and the computers probably told to behave themselves while profit results are in the frame.
Speaking of snowballing, there's been a bit of that going on in emerging markets recently. Not in emerging heavyweights like China and Brazil but in the markets of lesser Asia in particular. It was the Indonesian stock market's turn to tumble yesterday, falling 3.2%. The fear is rising US bond yields will draw away investor interest in emerging market stocks and bonds.
The impact has not been lost on Wall Street, although taper-talk is still front and centre. The US indices had a pretty good shot at a rebound rally last night but succumbed towards the close as traders squared up ahead of tonight's release of the minutes of the August Fed meeting. Will there be any taper timetable clues? Probably not, but Wall Street will be looking closely nevertheless.
The Dow was up over 60 points mid-market last night but fell away and is now hanging on just above the psychological level of 15,000. The broad market S&P 500 performed more definitively however in breaking its four-day losing streak. Positive late season earnings reports from Home Depot (Dow) and Best Buy helped enliven the mood.
Weighing on the Dow was leader Exxon, which suffered at the hands of a sudden 2% drop in Nymex oil. It was expiry day of the September contract and few were keen to roll the current geopolitical premium forward across the Fed minutes release. West Texas fell US$2.18 to US$104.92/bbl while Brent, which is already trading October delivery, rose US19c to US$110.09/bbl.
Base metals are all squared up in London and barely bothered the scorer last night, despite a 0.4% fall in the US dollar index to 80.92. The euro is outstripping the dollar at the moment as the taper debate rages on across the Atlantic, and the dollar index does not show the impact of falling emerging market currencies, such as a particularly weak Indian rupee. The Aussie still managed to fall another 0.4% to US$0.9077, helped by the RBA minutes, while gold did the right thing and rose US$6.60 to US$1372.40/oz.
Spot iron ore fell US20c to US$139.00/t.
The bounce in the S&P 500 has provided confidence for Bridge Street after yesterday's drop, with the SPI Overnight up 13 points or 0.3%.
So it's Fed minutes tonight, but before that we have another big round of Australian profit results to absorb.
Today's highlights include Adelaide Brighton ((ABC)), Asciano ((AIO)), Boral ((BLD)), Iluka ((ILU)), Seek ((SEK)), Suncorp ((SUN)) and Woodside ((WPL)), just to name a few. Please refer to the FNArena Calendar.