Here's my summary of the key news overnight with an important election change in America.
US mid-term elections have been tough on incumbents with some dramatic switching away from the Democrat Party. Both houses of Congress will now have Republican majorities, with the Senate back in the red corner. The final two years of Obama's term will be a tough one for him. Having said that, the winners on the Republican side are tending to be the more 'moderate' candidates. Despite that, the message is clearly anti-Democrat.
Unease in these results outside the US is not reflected there. Markets are pricing risk the same way as before.
One consequence for New Zealand out of this change is that President Obama may now be able to make necessary compromises to get the TPP deal through Congress.
This Saturday we get the latest US non-farm payrolls report which is major market data. Today we got the pre-cursor ADP payrolls report and that was better than observers were expecting. It showed payrolls expanded above +200,000 for the seventh month out of the last six. This is a good sign for Saturday and it buoyed markets.
The Dow and the S&P500 are both at or near all-time records.
Earlier this morning, the Federal Reserve unveiled a final rule on Wednesday designed to prevent large financial firms from becoming so big that their failure could shake the core of the financial markets.
No one institution can be bigger than 10% of the total US financial system. (If that rule was in place in New Zealand, our four biggest banks would need to be dismantled.)
Meanwhile, services industry activity slowed in the US for a second straight month in October, suggesting some loss of momentum in their economy early in the fourth quarter, although it is coming off a very strong level.
And here's an eye-watering factoid: investors pulled US$48 billion from PIMCO’s mutual funds in October following the departure of star manager Bill Gross, the fund research firm Morningstar said earlier today.
In Australia, a major analyst has issued a stern warning. Australia could face its first recession in almost 25 years unless authorities further stimulate the economy, Morgan Stanley said. Growth there will slow to under 2% and unemployment could reach 7% they said. The iron ore price has fallen further in the past week.
And China has announced that it
In New York, UST 10yr bond yields were again flat in trade today and are currently at 2.36%.
The oil price has stayed firmly at its new lower levels and is now over US$78/barrel with the Brent price just over US$83/barrel.
The gold price however took a further tumble and is now below US$1,149/oz.
Following on from the surging US dollar, we lost all of yesterday's gains in the kiwi dollar. It is now at 77.2 USc, at 89.9 AUc, and the TWI is at 76.5.
If you want to catch up with all the changes yesterday we have an update here.
The easiest place to stay up with today's event risk is by following our Economic Calendar here »
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