By Greg Peel
The Dow closed up 62 points or 0.4% while the S&P gained 0.8% to 1695 as the Nasdaq rose 1.1%. Apple was up 2.4%.
Stop the presses! Australia's manufacturing sector expanded in September. The local PMI measured 51.7, up from 46.4 in August. Of all the major global PMIs, Australia's is the most volatile, and the reading could just as well drop 5 points in October. But we'll take it for now ? the first month of manufacturing expansion since June 2011.
August retail sales surprised with a 0.4% gain after a miserly 0.1% in August, and the election had not been held yet.
Beijing's official Chinese manufacturing PMI was, on the other hand, a little disappointing. Mirroring HSBC's reading, which showed a rise to 50.2 from 50.1, the official number rose to 51.1 from 51.0. Economists were hoping for 51.6, but at least expansion is still underway.
Throw in no rate cut from RBA, when none was expected, and uncertainty over the potential for a US shutdown, and Bridge Street went absolutely nowhere for most of yesterday, finishing down a tad. Those looking for forward policy clues from the RBA statement would have been disappointed, given there was very little variation in the October statement from the September statement.
Governor Stevens noted "There has been an improvement in indicators of household and business sentiment recently, though it is too soon to judge how persistent this will be". He also acknowledged the recent bounce in the Aussie, and reiterated, hopefully, that a lower currency would help the Australian economy rebalance. Otherwise, the RBA will "continue to assess the outlook". No clues there.
We have reached an interesting point in RBA policy expectations. For over a year there has been general consensus among economists that the central bank must ease, with only degrees being up for debate. Now we find the futures market and one group of economists on the one hand still insisting further cuts are coming, and on the other hand another group of economists suggesting the easing cycle is over and we might even see the first rate rise as early as next year.
Bridge Street spent most of the session counting down to the 2pm (local time) deadline for a US budget vote that would prevent a shutdown, but it never came. It still hasn't come. Traders nevertheless correctly predicted that Wall Street's response would not be overwhelmingly negative, with a slight pullback in markets already booked and possibly sufficient. And so it was. US stock markets shrugged, and bought the dip. No one really believes the shutdown could last terribly long.
And there are fractures appearing in the Republican resolve. The hard-line right wing is maintaining the rage, but the moderates are becoming restless. The Democrats, on the other hand, are standing firm. Obama is not going to back down, and the longer the Republicans hold out, the more support they are losing from the general populace. While Wall Street is Republican at heart, few support the embarrassing charade. Just get on with it.
Returning to the global manufacturing PMI data, we see the eurozone measure having slipped to 51.1 in September from 51.4 in August, the UK slipping to 56.7 from 57.1, but the US rising to 56.2 from 55.7. We can forgive a slight pullback in Europe given the numbers are still expansionary. If we throw in Japan's number, which rose to 52.5 from 52.2, and add in Australia's 51.7, we find a rather remarkable result. I don't have the records in front of me, but I suggest it's been years since all the little black ducks have lined up in a row, showing a full suite of numbers above 50.
That has to be a good sign.
No such a good sign was the response in commodities markets last night to the US shutdown. Having failed to respond much ahead of the shutdown, unlike stock markets, last night gold fell US$39.90 to US$1289.00/oz and the base metals all fell 1-2% (except tin, down 0.5%). Brent crude dropped US54c to US$107.78/bbl and West Texas dropped US49c to US$101.84/bbl.
Gold's fall has been attributed to expectations the shutdown is just a storm in a tea-cup, hence safe havens not required. Watch out for the debt ceiling fight however, the pundits warn. The US dollar index ticked down a tad to 80.16. The Aussie jumped, nevertheless, on no rate cut presumably, and maybe the PMI and retail sales data.
The US ten-year bond yield mimicked the stock market and rose 3 basis points to 2.64%.
The SPI Overnight closed up 23 points or 0.4%.
Note that with China on holiday, the spot iron ore price will remain unchanged at US$131.40/t until next week.
Australia will see building approvals and new home sales figures today along with the August trade balance. Tonight in the US brings the ADP private sector jobs number. Remember tapering? Friday is meant to bring the non-farm payrolls data, but will it? America has a "Gone fishin'" sign up.
Rudi will appear on Sky Business this evening at 5pm.