The Overnight Report: Toss The Coin

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December 11, 2013 9:52 AM EST

By Greg Peel

The Dow fell 52 points or 0.3% while the S&P lost 0.3% to 1802 and the Nasdaq was steady.

Following on from Monday's heavy volume, portfolio-driven slump on Bridge Street, yesterday began well and provided all the hallmarks of buyers returning after standing back the day before. But it wasn't to last and the ASX 200 disappointing lost all of its early gains over the course of the session, once again on strong volume.

Economic data releases on the day were mixed, although the market does not seem to be beholden to any data points right now.

Australian housing finance rose 1.0% in October, meeting expectations, to be up 13.3% for the year. Owner-occupiers continue to be squeezed out of the market by property investors, particularly in NSW.

NAB's monthly business survey showed conditions improved slightly but remain to the negative side, rising one point to minus 3. The historical average is zero. Confidence fell one point to plus 5 which is bang on average, but well down from the spike to plus 12 in September post election.

Chinese industrial production rose by 10.0% year on year in November having risen 10.3% in October. Retail sales rose 13.7%, up from 13.3%. Fixed asset investment rose by 19.9% in the eleven months to November having risen 20.1% to October.

The Chinese numbers painted a mixed picture. The drop in industrial production belies November's increase in exports and is not what the world wants to see but Beijing is intent on lifting China's domestic economy, hence stronger retail sales growth is a positive. Fixed asset investment growth may have slipped but seems to hang steadily around the 20% mark.

Meanwhile, Wall Street is split down the middle of those expecting the Fed to taper next week and those still believing March will be the date. There is insufficient confidence either way to provide for strength in stocks. One economist supposedly "close" to the Fed ? CNBC's Steve Liesman ? believes the Fed will move in December. Others disagree, and point to the fact every man and his dog, and Steve Liesman, thought tapering would be announced in September and got it wrong. And then there's the other question.

Were the Fed to announce tapering next week, which way will the market move? Tapering is inevitable eventually and Wall Street has skirted fresh highs. Does this mean tapering is now built into prices? Or will we see a significant sell-off as stimulus is eased? Perhaps we can safely assume that if tapering is not announced next week, Wall Street will not go down.

The gold market clearly doesn't expect tapering to be announced on Wednesday, assuming gold is behaving as it should. The metal rose US$20.30 to US$1260.00/oz last night in concert with a fall in the US dollar index of 0.2% to 79.95. Forex traders suggest St Louis Fed president Bullard's comments earlier in the week imply March tapering. (Others see them differently). The Aussie is higher again on dollar weakness, up 0.5% to US$0.9156.

The weaker greenback helped base metals slightly higher for the most part, albeit tin took a bit of a tumble. Spot iron ore is unchanged at US$139.40/t.

A report released last night suggested OPEC production fell last month to its lowest level in two years, which spurred on oil prices. Brent rose US19c to US$109.59/bbl and West Texas jumped US$1.07 to US$98.41/bbl.

The SPI Overnight is forecasting another dismal session downunder, falling 36 points or 0.7%.

There is little doubt the tapering debate will continue right up to next Wednesday night, and it is unlikely we'll see any strong moves out of Wall Street in the meantime.

On the local front, today sees the release of Westpac's monthly consumer confidence survey.

Rudi will appear on Sky Business this evening from 5.30pm.

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