In a market wrap, analysts at ANZ Bank New Zealand Limited explained that markets are broadly stable as US data releases continued to indicate strong growth momentum ahead of tomorrow’s mid-term elections in the US as well as FOMC, RBA and RBNZ decisions this week.
Key Quotes:
“We expect the FOMC to maintain its upbeat assessment for household spending and the labour market despite recent financial market volatility. Wording around business investment will be important to watch given the disappointing 0.4% saar rise in equipment investment in the advance Q3 GDP report. At the time of writing, the S&P and DJIA were up 0.1% and 0.4% respectively. In Europe, the DAX was off 0.2% and the FTSE was up 0.1%. Tentative hopes that some progress is being made in Brexit talks provided GBP and the FTSE with some mild support. The yield on the US 10-year note slipped 2bps to 3.19%. WTI lifted 0.5% and gold fell 0.2%.”
Data event pulse
“The US ISM non-manufacturing index beat expectations at 60.3, but unsurprisingly was down from September’s record 61.6 print. The employment sub-index and business activity index slipped to 59.7 (last: 62.4) and 62.5 (last: 65.2) respectively. New orders were broadly stable at 61.5. Overall, the data remain very elevated and above the Q3 average of 58.6, indicating a solid start to Q4.”
BREXIT weighing:
“UK October services PMI fell 1.7pts to 52.2, its lowest reading since March. Both the backlog of works index and the incoming new business index fell, with Brexit uncertainty appearing to have weighed. The latest on that front is that the UK is reportedly aiming for a late November EU Brexit Summit and will discuss terms of a possible deal at the cabinet meeting tomorrow. Reaching agreement over the Northern Ireland border remains the main obstacle. The UK is proposing a “review” mechanism to ensure the UK is not tied to the EU indefinitely in a transition arrangement. The EU is apparently willing to consider this, but wants its backstop of Northern Ireland remaining in the customs union as the ultimate insurance. In Europe, the November Sentix investor index fell to 8.8 (last: 11.4). Brexit, Italian uncertainty, and recent market volatility appear to have weighed.”
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