By Greg Peel

The Dow rose 48 points or 0.3% while the S&P gained 0.3% to 1634 and the Nasdaq added 0.4%

Result season took a back seat on Bridge Street yesterday as offshore pressure finally became too much and Australia joined in a Syria-related risk-off divestment which saw cyclicals dumped, with materials hardest hit, and the defensives of staples, healthcare and utilities preferred. The index fell on the open by over a percent and pretty much stayed there for the rest of the day. This again suggests not so much of a sell-off as a lack of buyers.

In local economic news, yesterday's release showed June quarter construction work done declined 0.3% from the March quarter when economists had expected a 1.0% gain. Private sector construction fell 0.3% and public sector 0.6%. Engineering construction fell 0.2%, non-residential construction fell 1.3% and residential building activity was flat. ANZ economists suggest the peak in WA resource sector investment has now passed and the peak in Queensland is being reached.

While this result may see economists ticking down their GDP forecasts, more important from an RBA monetary policy stance is today's June quarter capex and capex intentions data.

There was no new news on the Syria front last night, with Washington and allies clearly still trying to work out what one might do in this situation. The president was also distracted by the obligation of delivering a speech to mark the 50th anniversary of Martin Luther King's iconic "I have a dream" speech at the Lincoln Memorial.

No new news meant Wall Street could reflect on whether Tuesday's response was more knee-jerk than considered, although the stock indices peaked in the afternoon and drifted back again before the close. The day's economic data release of note was July pending home sales, which fell 1.3% to mark two months of declines. This data point is another indicating a waning in the strength of the US housing recovery, with rising mortgage rates being blamed. Many would suggest some consolidation in the housing market is not such a bad thing, given the recovery was starting to look a bit bubbly.

The irony is that US mortgage rates have risen because US bond rates have risen, which have risen because of Fed tapering fears. Housing data are on the radar of the FOMC, hence any weakness may well delay the timing of the first tapering. It's a bit of a feedback loop.

The US dollar rebounded last night, with the index rising 0.4% to 81.43. The ten-year bond yield jumped back 6 basis points to 2.78%, almost recovering all of Tuesday's fall and despite the weak pending sales number. Gold held its position nevertheless, relatively steady at US$1417.40/oz, while the Aussie is half a cent lower at US$0.8943.

Base metals were weaker in London, but the suggestion is that given the circumstances, metals have held their recent range quite well. Copper fell 0.6% and aluminium 1.2%. Spot iron ore fell US10c to US$138.50/t.

It's a different story for oil. Syria's contribution to global oil supply is negligible, but that's not the point. Any escalation of hostilities in the Middle East raises the spectre of greater ultimate disruption if things start to get nasty. Notably, nevertheless, the new Iranian president surprised the world overnight by tweeting (wonders never cease) that Iranian officials "completely and strongly condemn the use of chemical weapons in Syria" and that "the UN should use all its might" to prevent more attacks. Rouhani managed to stay balanced by not specifically linking Assad to chemical attacks, and later suggested "prudence" should be used in resolving the crisis.

The oil markets are not waiting around for a quick resolution. After sharp jumps yesterday, last night Brent rose another US$1.63 to US$115.99/bbl and West Texas rose US46c to US$109.47/bbl. We see here the Brent/WTI spread starting to widen again, with Europe more dependent on Middle East oil exports while North America is producing ever more of its own energy supply.

Bridge Street will be looking at least for some stability today, with the SPI Overnight up an unconvincing 1 point.

The US June quarter GDP will be revised tonight, with economists looking for quite a positive revision to 2.3% from the first estimate of 1.7%. No doubt the result will play into the tapering debate.

In Australia its June quarter capex, as noted, along with monthly new home sales. And the results season rolls ever closer to its conclusion. Today's highlights include Qantas ((QAN)), Ramsay Healthcare ((RHC)) and Westfield ((WDC)).

Rudi will appear on Sky Business at noon and again between 7-8pm for the Switzer Report.

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