Good Morning.
Yesterday in a late session turnaround, the US stock market erased losses and ended the day marginally higher driven by the technology sector. The S&P 500 index gained less than a point to finish at 1,433.81, edging into positive territory at the very end of the session, the benchmark had hit an intraday low of 1,422.06. After falling 108 points, the Dow Jones Industrial Average turned higher in the last few minutes of trade to finish up 2.38 points at 13,345.89. The Nasdaq Composite, after falling to an intraday low of 2,995.7 ended the session at 3,016.96 or 0.40% higher.
Following the late session move in US, Asian benchmarks started the day in positive territory supported by Yahoo Inc, the Web portal posted a big jump in profit (Yahoo reported a third-quarter profit of $3.16 billion, or $2.64 a share, compared with a profit of $298.3 million or 23 cents a share in the year-earlier period) and buy back speculation drove the stock higher in the after hours session. But dividend worries in Japan, Kansai Electric Power has been reported that won’t pay a dividend at the end of the fiscal year, and sales in energy-sector firms have sent Asian benchmarks in negative territory.
Less than an hour before the close: the Nikkei lost 0.21% to 8,991.46, South Korea’s Kospi declined 0.27% to 1,936.42 and the Shanghai Composite Index lost 0.61% to 2,119.65, Hong Kong markets were closed for a holiday.
In the currency space, the dollar rose to 80.02 yen, its highest since July 6, with expectations for further monetary easing from the Bank of Japan on October 30 to underpin the Japanese currency. The yen weakened to a 5-1/2 month low of 104.59 yen against the euro and a 1-month low of 82.68 against the Australian dollar. A set of reports coming from Japan today evidenced that Japan is struggling to sustain momentum in the face of global headwinds and cooling demand and investment at home therefore increasing the chances for further BoJ easing measures. The common currency steadied at $1.3055 versus the greenback as ECB’s Asmussen reiterates that the bank would do everything possible to show the euro is irreversible.
On the commodity side, Oil snapped a three day decline in New York as the Keystone pipeline won’t resume full deliveries until next month after a shutdown. Front-month futures traded 0.2 percent higher after losing 3.7 percent since Oct. 17 to settle at the lowest in more than two weeks yesterday. Brent Crude fell as much as 0.2 percent and rose 0.3 percent. Gold fell 0.05% to 1,725.40$ an ounce as traders awaited the outcome an upcoming Federal Reserve meeting on US monetary policy.
Several central banks hold policy meeting this week besides the US Federal Reserve, the Bank of Canada and the Reserve Bank of New Zealand. All of them are expected to keep rates on hold but traders will be focused on their statements expected to be dovish by Barclays Capital.
Today we will be looking to solve our divergence puzzle (we talked about it in yesterday’s Closing Thoughts) between Spanish government bonds and the common currency based on the belief that a solution will increase the probability of our trades. Never underestimate the power of cross assets analysis.
Have a great day.
