Reaction to the Fed minutes and stronger commodity prices will be the driving themes for markets this morning.
The FOMC minutes produced a buy the rumour, sell the fact reaction in key markets overnight. The Fed remains understandably uncertain about inflation which remains stubbornly soft, despite the labour market moving inexorably closer to a point that should be driving pricing pressure. However, it seems that some in the market may have been anticipating an expression of greater confidence about the 2018 outlook by FOMC governors. Disappointment, saw the first reversal in the downtrend in US 2 year bonds that’s been a feature of markets since late October.
The sell-off in the US Dollar that also followed the FOMC meeting may prove well timed for Aussie Dollar bulls. It has coincided with a lift in commodity prices and an oversold condition that could see Aussie Dollar support continue.
The rally in iron ore and oil overnight appears driven by expectations of tightening markets next year. Oil markets are assuming that a continuation of the Opec//Russian production cuts will continue to tighten the market. Iron ore markets are now looking forward to spring when the winter steel production cuts will end. This should deliver a positive open for mining and energy stocks in the ASX 200
Although Amazon Marketplace will open for business on a trial basis today, it may be some time before investors can gauge its impact on the local retail industry. The first clue could be signs of extra pressure on margins over the vital Christmas sales period.