Global Markets Overview – 11/15/13

After having set up the market for a dovish tone, it was one-way traffic at the Senate hearing as incoming Fed chair Janet Yellen re-emphasised the need for QE. While acknowledging the economy is significantly stronger and continues to improve, she said the US economic recovery is still fragile and as a result, prematurely pulling aid could derail the recovery. This was not really fresh news and traders didn't add to US dollar shorts. The market has known for a while that Janet Yellen's policies are closely aligned to Ben Bernanke and therefore this wouldn't have come as a big surprise. It wasn't a good session on the data front with unemployment claims and trade balance data disappointing for the US.

The standout performer was USD/JPY, which rallied through 100 after momentum really picked up in yesterday's Asian trade. A slower reading for Japan's Q3 GDP saw talk of further stimulus from the BoJ ramp up along with comments by Finance minister Aso who said FX intervention is a policy option. The pair is now back above 100 for the first time since September and put in a stellar performance yesterday. We are in turn calling the Nikkei up 1.3% at the open to 15,075; the last time the Nikkei traded above 15,000 was back in May.

European GDPs mixed

Over in Europe, traders were on GDP watch with euro area Q3 GDP in-line with consensus. The main story however was France relapsing and returning to contraction (-0.1%). The mixed GDP readings kept the euro at bay and EUR/USD remains range-bound around 1.346. Later today we have a CPI reading for the region and ECOFIN meetings where finance leaders will discuss the issues which the region is currently facing.

China plenum details warrant some caution

There were some mild concerns about a spike in China's interbank rates yesterday with the 7-day repo touching 5% before pulling back to 4.3%. This was mainly due to the PBoC abstaining from open market operations yesterday. There is also still some frustration and uncertainty about the lack of detail from China's Third Plenum. Investors will be looking at how structural reforms will impact the mix of growth, inflation and the credit cycle going forward. Any releases from China on the Plenum could drive markets today.

Mild gains for ASX 200

Ahead of the open we are calling the Aussie market mildly firmer at 5360. A slight tick up in iron ore and gold should support resource names today. Iron ore was up 0.4% to 136.60 and gold recovered to 1288. BHP's ADR is pointing to a 0.3% rise at the open to 37.92. We will continue to watch James Hardie today after it rallied to a record high yesterday following solid results. The stock has been upgraded to Outperform (from Neutral) by DB today with a $13.51 price target. AGMs will continue to dominate markets with Macmahon, Perseus and Mesoblast.

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