The Overnight Report: Who Killed Santa?

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December 12, 2013 9:36 AM EST

By Greg Peel

The Dow fell 129 points or 0.8% while the S&P dropped 1.1% to 1782 and the Nasdaq lost 1.3%.

Another day, another profit warning and another weak session on Bridge Street. OZ Minerals ((OZL)) fell 14% yesterday following a profit warning and joined the team of QBE Insurance, Qantas, WorleyParsons...just to name a few companies which have shocked the market with sizeable guidance downgrades in recent months. It's no wonder investors have lost faith.

Not helping the cause was Westpac's monthly consumer confidence survey, which showed a fall to 105.0 from 110.3 in November. That's the lowest level since July, and 4.3% below the three month average set amidst election/house price euphoria. Christmas is not a good time for consumers to be losing confidence.

And it was otherwise a sad day for someone who still has fond memories of sliding around untethered in the back seat of the EK, towing the caravan up the coast behind the HR Premier, and many more. The announcement of the impending death of the Holden cast a pall over yesterday's session.

The ASX 200 has now fallen eight of the past nine sessions and is down 6.2% from the five-year high set in late October. 2013 has up to now, nevertheless, been the year without correction. Each year since the post-GFC rally began in 2009 has seen a correction of at least 7%. Looks like this one's come late. While Bridge Street is paying scant attention to Wall Street of late (fell 0.8% when Wall Street rallied 1.3% on the last non-farm payrolls report) a lot still hinges on what happens next week.

A Bloomberg survey of US economists shows 34% believe the Fed will announce tapering next week, 17% up from the November survey. While that puts the odds firmly in the March camp (bearing in mind the Fed has become adept of late at doing the opposite of what the market expects), Wall Street is not taking any chances. Across the various markets, traders are squaring up.

Last night it was revealed House and Senate negotiators had reached a deal to set spending levels for the next two years and replace some automatic budget cuts, thus heading off the threat of a US government shutdown next month. While one might expect this news to be very positive for Wall Street, clearly this is not reflected in last night's action. The problem is (a) such an agreement has been anticipated, (b) it still has to pass through the two houses and (c), if the fiscal crisis is actually over, the Fed no longer need be reluctant to begin tapering monetary stimulus.

We still have four more trading sessions to complete (five locally) before the market holds its breath for the Fed statement.

The only silver cloud to come out of yesterday's weak local consumer confidence read was a one cent fall in the Aussie to US$0.9056. The Aussie fell despite the US dollar index ticking down 0.1% to 79.88. Gold dropped US$6.50 to US$1253.50/oz.

The Aussie had been strong this week in the wake of what were considered reasonably positive monthly data out of China, and China has been the focus of traders on the LME this week. Base metals prices were all up again last night, with copper rising 0.7% and nickel the stand-out at 1.3%.

A big rise in US gasoline supply last week was behind a US$1.03 fall in West Texas crude to US$97.48/bbl last night, while Brent ticked up US12c to US$109.71/bbl.

Spot iron ore fell 30c to US$139.10/t.

The SPI Overnight fell 26 points or 0.5%.

It's jobs day in Australia today. Tonight sees US retail sales for November, which include the Thanksgiving sales period.

Rudi will be making his regular appearance on Sky Business today (noon-12.45pm).

Well that's it from me. This will be my last Overnight Report for the year. Through to Christmas readers will enjoy the morning scribblings of my old Mac Bank colleague Henry Jennings, now of BBY, who I believe writes the second best overnight market report in the country. I shall return, refreshed, on Monday, January 13.

Merry Christmas and a Happy New Year to all.

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