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US Markets Build on Yesterday's Post-Fed Gains


Today's financial recap and tomorrow's financial outlook.

The Scottish referendum vote took place today with the final tallies due at 2:00am local time. Exit polls are illegal in the UK, so investors will have to wait until tomorrow to learn whether or not Scotland voted to secede from its union with Britain. The GBPUSD FX cross, or "cable," has recovered all of its losses from Sep 8 when a new survey showed for the first time that more voters wanted to seek independence. Since then, a plethora of surveys have indicated that the Scottish push for independence is unlikely to succeed. Thus, market participants have largely pared back their views on the risk of a split.

Overnight, the People's Bank of China (PBoC) cut its 14-day repo rate by 0.20% to 3.5%, which signaled to local banks that the central bank was starting a new rate cut cycle. Chinese stocks were restrained as the poor home price data, which showed declines in 68 of 70 cities, weighed on sentiment. The Swiss National Bank (SNB) refrained from setting a negative interest rate to help defend its FX barrier against the euro, but said that it was prepared to buy unlimited amounts of foreign currencies if necessary.

Also in Europe, the take-up by banks of the new targeted long-term refinancing loans was below the lowest economist estimate. Banks only bid for 82.6 billion euros of loans versus the 175 billion expected. The initial takeaway was positive for the EURUSD and negative for European equities, but that was quickly shaken off. Market participants now moved to the belief that this will require even more drastic actions by the ECB. Another round of loans are available in December.

US markets traded higher and sustained that strength throughout the day. The S&P 500 (SPX) ended up closing at a new all-time high of 2011 led by strong gains in financials. Energy and utilities stocks slumped as inflation expectations fell further, dragging down crude oil. Homebuilders were weak following a report this morning that showed August housing starts fell 15.4% to an annualized rate of of 956K. Economists had expected a drop of 5.2% to 1.037 million.

Oracle (ORCL) dipped in extended trading after missing analysts' first-quarter earnings expectations. The company also named current CEO Larry Ellison Executive Chairman and Chief Technology Officer, with Safra Catz and Mark Hurd serving as new co-CEOs. Finally, Oracle announced it is increasing its share repurchase program by $13 billion.

Tomorrow's Financial Outlook

Tomorrow morning we will have the results of the Scottish referendum vote in our hands. Its results will likely determine the tone of the trading session. Should the vote succeed, GBPUSD could fall as much as 10% as growth will be in serious jeopardy for Britain. There is still some remaining positions held to protect for this event, and they could be unwound.

The only economic event scheduled for tomorrow in the US is leading economic indicators for August, which are expected to grow by 0.4% for the month after rising 0.9% in July. Alibaba will price its $22 billion IPO at a price of $68 under the ticker BABA.

There are no major earnings reports scheduled for tomorrow in the US.

Twitter: @Minyanville

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