Quiet day as markets assess impacts of Hurricane Sandy

10.00 AEDT, Tuesday 30 October 2012

Quiet day ahead as markets wait to assess impacts of Hurricane Sandy

By Ric Spooner (Chief Market Analyst, CMC Markets)

Australian investors look set for another quiet day with the news that US markets will be closed for a second day.

If the damage from Hurricane Sandy is significant, markets will need to assess its potential impact on US and world economic growth in coming days. Natural disasters usually have an initial negative impact as production is lost. This is followed by a positive impact as economic activity increases to replace damaged infrastructure. As markets are forward looking, they often move fairly quickly to anticipate the positive rebuilding phase after a natural disaster.

The US personal spending figures for September released last night confirm a story of gradually building confidence amongst consumers in the world’s largest economy. The last two months have seen strong increases in spending as consumers react to the improved situation in Europe and the confidence boost of rising house and share markets. This confidence is reflected in a declining savings rate which stood at 3.3% last month compared to 5.1% in 2010.

Asian currency markets will focus on the Bank of Japan and any fresh monetary easing measures they announce. The yen has weakened recently as traders anticipate further BOJ initiatives. Traders will be mindful of their experience after the Fed’s QE 3 when profit taking set in fairly quickly and the US Dollar began to strengthen in a classic case of sell the rumour and buy the fact.

http://www.cmcmarkets.com/

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