The Dow closed down -85 points or -0.4% while the S&P fell -0.3% to 2572 and the Nasdaq was flat.
I suggested yesterday morning that a 34 point gain for the ASX200 suggested by the SPI futures pre-open seemed a bit of a stretch given strength on Wall Street overnight was all about Big Tech, with which the Australian market has no correlation. As it was, the index closed up 15.
And it was not a case of shooting up early before pulling back to a more sensible level. The index stumbled on the open, dropping down towards support at 5900, before grafting its way back to a positive close.
Almost all sectors finished in the green by varying degrees, with a -0.2% fall for telcos and -0.1% for consumer discretionary providing the offsets. Energy (+1.4%) was the standout winner on the day on the back of a jump in oil prices and materials managed to rise 0.2% despite weaker metals prices.
Today is the last day of a month in which the index has enjoyed a 4% rally after spending four months going nowhere so the possibility of profit-taking to square the books and lock in the gains arises. Wall Street has provided little impetus and the best futures traders can come up with is a zero point move.
There is a handful of production reports due from the resource sectors today and a slew of AGMs, but the highlight today will be September quarter sales numbers from Woolworths ((WOW)).
We also have Chinese PMIs due, a Bank of Japan policy meeting and local private sector credit numbers so there’s a bit going on to otherwise impact on sentiment.
In lands beyond we have the details of Trump’s tax plan expected this week, Trump’s decision on Fed chair possibly due this week, a Fed meeting, and a rekindling of the whole Russian election interference saga. Much to be cautious about.
Former Trump campaign manager Paul Manafort has been charged with conspiracy as a result of the Russian election interference investigation. While Wall Street was paying attention, Manafort’s fate was not a prime concern for traders but rather whether there were any implications for Trump himself, which appears not to be the case.
More concerning for Wall Street was news the House of Representatives is considering phasing in Trump’s planned corporate tax cuts, dropping to the 20% goal in stages by 2022 rather than all at once. Clearly this is not want Wall Street wants, nor has priced in. Trump himself does not want a phase-in.
Not only is this a potential source of disappointment, it also harks back to the disaster that was Trump’s attempts at healthcare reform. “Repeal and replace” had been a primary campaign promise and the mantra of Republicans ever since Obamacare was introduced. Yet still they could not agree on a replacement. Is this “phase-in” plan an early sign attempts at tax reform are going to head down a similar path?
Concern was most evident in US small caps last night – the greatest beneficiaries of tax cuts – as suggested by the Russell falling -1.2% against the S&P’s -0.3% dip. The Nasdaq managed to hang in there despite Friday night’s huge surge.
US consumer spending jumped by 1.0% in September, marking the biggest gain in eight years. There was little fanfare nonetheless, given such as result was expected as households in Texas and Florida replaced damaged goods. Incomes rose only 0.4% so clearly households had to dip into savings to fund their spending. The savings rate fell to 3.1%, the lowest level since 2007.
The Fed’s preferred measure of inflation, core personal consumption & expenditure ((PCE)) rose a mere 0.1% in the month to remain at an annual rate of 1.3%. This measure has remained below the Fed’s 2% target for five and a half years.
With all of the above to expect this week, as noted above, Wall Street is more likely to square up than push forward, individual earnings reports notwithstanding, until the Fed statement, decision on Fed chair and tax reform details are known. And Friday brings the jobs report.
Tonight is Halloween. Spare me.
Doubts over tax reform swiftly spun the US dollar index around last night. It fell -0.4% to 93.45. A 0.6% jump in the pound also helped, as traders set for a possible BoE rate hike come Thursday.
The dollar’s fall helped gold up slightly, to US$1275.80/oz.
Base metals were mixed, with copper up 0.5% and zinc up 1%.
Iron ore fell another -US70c to US$58.00/t.
West Texas crude kicked on US15c to US$54.13/bbl.
The Aussie is up 0.2% at US$0.7689.
The SPI Overnight closed “unch”.
As noted, today brings local private sector credit numbers, China’s PMIs and a BoJ meeting.
The first estimate of eurozone GDP is due tonight.
Bendigo & Adelaide Bank ((BEN)) is among today’s AGM holders.
Woolies ((WOW)) posts quarterly sales numbers.
Harvey Norman ((HVN)) goes ex.
Rudi will connect with Sky Business, via Skype, at around 11.15am to discuss broker calls.