Three events over the past 24 hours have influenced markets and currencies. Firstly, last night a report showed there were fewer jobs created in the US over Sept than many had hoped. This reduced the likelihood of an imminent tapering in the Fed's current stimulus strategy and also pushed markets and the Aussie dollar higher. Secondly, this morning, the latest Consumer Price Index (CPI) showed that prices rose by a more than expected 1.2 per cent over the September quarter; all but wiping out the chances of a rate cut in the next few months and pushed the local currency even higher (high of US97.58c).
Trading specialists from Jefferies work on the floor of the New York Stock Exchange (Photo: Reuters)
At around 2.30pm (AEDT), news that the Chinese central bank wouldn't be pumping funds into its financial system for now (partly to prevent overheating and control inflation) saw Australian shares slip for the first time in seven sessions and the Aussie dollar give back some of its gains to finish at US95.5c. Perhaps an overreaction? On a positive, local shares are still hovering around 5 year highs.
The miners remained in favour for the duration of the day, with the S&P/ASX 200 Materials Index gaining 0.78 per cent. BHP Billiton (BHP) jumped by 1.21 per cent, Rio Tinto (RIO) slipped by 0.5 per cent and Fortescue Metals (FMG) dropped by 1.11 per cent. In recent years, BHP has struggled to crack through $38 per share, so the next few days will be an interesting test.
Looking ahead, a European consumer confidence reading will be issued at 1am (AEDT), with sentiment still likely to remain negative (reading of -14 is expected by market). A 30-year bond auction will be held in Germany tonight also.
In the US, the FHFA monthly home price reading for August will be issued together with a weekly crude oil inventories update. House prices were 8.8 per cent higher than a year ago in July. On the earnings front, 41 companies are reporting earnings, including Boeing, Caterpillar, ETrade, AT&T and Motorola.
Tomorrow, a speech by the RBA Deputy Governor will be the economic highlight locally in what is expected to be a quiet session for data. Across the region, keep your eye on the HSBC Flash manufacturing PMI issued in China at 12.40pm (AEDT). This has the potential to move the local market, currencies and mining stocks Thursday afternoon.
Volume was higher as equity options expire tomorrow.
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