Flat start expected following return to US trading

10.01 AEST, Thursday 1 November 2012

Flat start expected following return to US trading

By Miguel Audencial (Sales Trader, CMC Markets)

A flat start to the Australian equities market is expected today as the US session ended in a stalemate when it returned to trading last night. The release of the Chinese Manufacturing PMI figure at midday today and the HSBC Final Manufacturing PMI data 45 minutes later is likely provide direction for traders.

The Dow Jones and NASDAQ indices displayed minimal losses while the S&P 500 ended virtually flat as investors struggled to assess the impact of Hurricane Sandy in the US Economy. Last night’s equities session displayed how hard it is to determine the dollar value of damages and the GDP effect of disasters such as these. In the coming weeks, expect these figures to be revised often as analysts adjust their estimates as they gather more information.

The Chicago PMI figure released last night of 49.9 was disappointing as it missed the expectations of 51.0. It is also below the 50.0 benchmark which means that the index is indicating that the economy is contracting. The US Employment Cost Index was also below expectations as businesses were not prepared to pay more for labour. It also shows that workers do not have the bargaining power to demand higher wages.

It will also be interesting to see how the Australian energy sector reacts to Crude Oil prices today. The West Texas contract traded higher last night due to the increased demand prospects caused by Hurricane Sandy. However, the Brent Oil contract which is traded in London finished lower. There has been a significant increase of Crude Oil inventories during the past three weeks and there is an expectation that the figure will report another increase of 2 million barrels tonight.

There is a lot important economic data due to be released in the next two days, including two manufacturing Chinese figures later today. The UK Manufacturing PMI, US Unemployment claims and ADP Non-Farm Employment change are due tonight. The US Non-Farm Employment change which is expected on Friday night will be given more attention than usual as it will have both economic and political implications with the US election to be held on 6 November.

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