Overview: Bias to risk assets. Stocks flat but commodities and risk fx higher after RBA surprise 0.25% rate hike sends AUD higher as hawkish comments feed expectations for further hikes ahead. India also hikes rates 0.25% as both central banks worry about inflation. EUR holds on despite bad news from PIIGS: Greek Deputy PM admits Greece must restructure (partially default) debt, Irish economist says Ireland must get budget in order soon or will need IMF.
One of the most event-risk packed weeks in memory, including US Congressional (today), Portuguese, and Greek elections, FOMC decision on QE 2, US jobs reports, possible mutual fund selling, etc. See Beware Coming Week Underestimated Market Movers And Potential Volatility for full details on likely market movers for the week.
See: Must Know Basics And Trading Ramifications of November 3rd The FOMC Announcement for details on this. Our guess: Fed will start small (~ $500 bln)but leave open the possibility for much more if need be. Markets have tended to focus on the positive, so damage to stocks and other risk assets from the initial smaller than hoped for package will be minimal, as will be any USD rally.
STOCKS: US Flat- For the second straight session, opening strength had the indices up ~1% to trade close to their five-month highs, but technical resistance, and uncertainty ahead of this week's major events left stocks to fade and finish virtually unchanged
US Bonds: Up- 10 Year Note closed higher lower Monday as stock prices stayed flat with yield higher up to 2.6280% from 2.6120%. The move may reflect reduced expectation for new US stimulus, which would involve Fed bond buying. Thus less stimulus means less bond demand.
Asia Stock Outlook: Up – Asian indices closed with mostly modest gains, reflecting uncertainty ahead of the risk event packed days ahead as noted above, with both US elections and stimulus decision today and tomorrow. Despite the surprise rate hike the Australian All Ordinaries index avoids a lower close.
European Stock Outlook: Up–European shares opening and staying modestly higher following Asia, for the same reasons - uncertainty
Commodities Outlook Monday To Midday Tuesday GMT: Crude up Monday and holding gains thus far today, gold and silver slightly lower over the past 24 hours, softs all down except for sugar, which is forming a bearish double top as it challenges 11 month highs.
FOREX Daily Outlook Monday To Midday Tuesday GMT: Despite flat stocks, forex (along with commodities) shows clear bias to risk in almost exactly per each currency’s position in the risk hierarchy.Over the past 24 hours, AUD, CAD, NZD strongest in that order, GBP, JPY, CHF weakest in that order
US Dollar Daily Outlook: Up vs. GBP, JPY, CHF, EUR (but giving up much of Monday’s gains against all these thus far Tuesday), down vs. all commodity dollars.
Euro Daily Outlook: Up vs. the CHF, JPY, GBP, down vs. the USD & all commodity dollars, Greek deputy PM says what markets widely believe, that Greece must restructure, undermines EUR and contradicts official Greek position that Greece will somehow pay back all debt.
Yen Daily Outlook: Up vs. the GBP, down vs. all others as USD gets some relief, concern about additional BoJ intervention
British Pound Daily Outlook: Down vs. all, pressured by poor construction PMI.
Australian Dollar Daily Outlook: Up vs. all on the news of the RBA’s surprise rate hike from 4.50% to 4.75%, with hawkish rate statement suggesting more to follow, though we suspect there will be some pause beforehand.
New Zealand Dollar Daily Outlook: Up vs. all except down vs. the AUD and CAD
Canadian Dollar Daily Outlook: Up vs. all except the AUD
Swiss Franc Daily Outlook: Down vs. all except up vs. the GBP and JPY
DISCLOSURE & DISCLAIMER: NO POSITIONS, THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY AND NOT TO BE CONSTRUED AS SPECIFIC TRADING ADVICE. RESPONSIBILITY FOR TRADE DECISIONS IS SOLELY WITH THE READER