The Overnight Report: Good News Is Bad News

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December 6, 2013 9:39 AM EST

By Greg Peel

The Dow fell 68 points or 0.4% while the S&P lost 0.4% to 1785 and the Nasdaq dropped 0.2%.

It was a rout on Bridge Street yesterday of the like we've seen occasionally over past months. Sharp moves down in the Aussie are often a trigger for foreign selling, albeit volume was tepid. A lack of rate cut from the RBA and a weak GDP result have weighed heavily on the banks in particular, which having been considered overbought have led the charge south, while strength in commodity prices, particularly iron ore, has failed to prevent pressure on resource stocks. Qantas ((QAN)) hit an air pocket and the market decided the Westfield ((WDC)) deal didn't look all that flash after all. Several factors have contributed to weakness since the ASX 200 hit its peak last month, and after a solid year of returns, year-end selling has a certain inevitability ahead of the holiday break.

The feeling is similar on Wall Street as the fiscal year-end approaches for most businesses. The overriding factor, nevertheless, is taper-talk, and the positive US economic data flow is making many nervous.

Last night the September quarter GDP result was revised a second time, and surprised all and sundry with a jump to a surging 3.6% from the earlier estimate of 2.8%. Of course the December quarter result will be the tell-tale, given the impact of the two-week government shutdown. Last week's jobless claims fell to 298,000, which is only the second time the 300k level has been breached since 2009.

Tonight it's non-farm payrolls.

Not all the numbers are great. Factory orders fell 0.9% in October and November chain store sales, which take the Thanksgiving sales into account, rose by only 2.1%. Stores had hoped for an increase in the range of 3.5-4.5% given last November's solid numbers.

So take your pick. Wall Street is selling off on weak data or selling off on strong data which implies tapering sooner rather than later. Or selling off either way in order not to lose the stellar returns posted in 2013.

The gold market is back to fearing tapering once more, after Wednesday night's brief short-covering burst. Gold fell US$18.00 to US$1228.20/oz last night despite a 0.5% fall in the US dollar index to 80.29. The dollar fell because the euro underwent a sharp short-covering rally which was triggered by ECB Mario Draghi's suggestion at last night's post policy meeting press conference that the central bank has no intention of easing policy again in the short term. The ECB cut its cash rate to 0.25% last month in the face of a eurozone deflation threat and nothing much has improved in the data since.

Despite yesterday's selling on Bridge Street, the Aussie is 0.3% higher at US$0.9064.

After a brief burst of enthusiasm, trading on the LME returned to its sedentary state last night with metal moves small and mixed. Spot iron ore fell US20c to US$139.50/t.

The oil dichotomy continues. While OPEC retained its production quota following its meeting in Vienna this week there was concern raised over renewed supply flowing from Libya and Iran. Meanwhile the surprise GDP revision provided a fillip for US energy demand. Hence the Brent-WTI spread continued to close in a little last night, with Brent down US61c to US$111.05/bbl and West Texas up US32c to US$97.52/bbl.

The SPI Overnight fell 17 points or 0.3%.

It's Nine Day today on Bridge Street and private equity interests will be hoping it's a better result than Dick Day was on Wednesday, which saw a lacklustre listing for Dick Smith Holdings ((DSH)). Dick held his IPO price at least. Nine Entertainment ((NEC)) has long been touted as the IPO of the year but initial investors would have hoped for a more buoyant market mood.

Australia's construction PMI for November will be released today and S&P will announce the planned promotions and relegations of stocks in the various S&P/ASX indices which will take effect in two weeks.

And it's jobs night in the US.

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