Global Markets Overview - 11/27/13

US in the green on housing data

Housing data is causing green on screens today as US markets warmed to the jump in the Case-Shiller house price index.

The Case-Shiller house price index, which measures the change in sell prices of residential dwelling across 20 US cities year-on-year, jumped 13.3% - the largest advance in the index since February 2006.

At the same time, US building permits data also released last night showed the amount of new permits hit its highest level of the year, at 1.03 million permits, versus estimates of 940,000, which is the biggest read since July 2008.

The housing optimism saw listed home builders driving the S&P well into the 1800 points mark, while the DOW made another record intraday high. This should flow through to local listing with US exposure. James Hardie is sitting just below its all-time high and could test that mark today, while Boral looks to break through the $5 resistance level it is currently fighting against.

However, not all US data was that pleasing; the consumer confidence figures actually contracted over the month to 70.4, down from 72.4 the month before; a bigger contraction than expected which cooled the mid-US trading day run.

I see the data released today as being a double-edge sword. The housing data shows sustained demand for new and used dwelling in a market that has been decimated by the GFC. Even during the recent spike in lending as the market led the Fed on tapering has not dented buyer enthusiasm.

That gives reasons for pause if you are a Fed watcher; the fact a major part of the US economy didn't flinch to rates rising may be a signal to the market to once more front run the Fed on the timing of tapering, and this time might get it right.

The data is stacking up; employment is strengthening as jobs added hits the 200,000 mark, housing is growing and manufacturing across the US is humming along.

Yes, unemployment is remaining stubbornly above the 7% level and inflation is flat lining but it is all pointing to the biggest debate around the Fed's meeting table and would suggest movement on its bond purchase program is closer than it may appear.

I have been critical of the communication coming from Fed members over the past year its inability to let the markets understand how it will unwind the program has caused unconventional trading conditions and today's data could increase these unconventional trading conditions. Be prepared for Fed members to move bond and currency markets as investors look for clues as to when.

Ahead of the Australian open

Ahead of the open the ASX 200 looks like dropping 12 to 5355 after a soft and variable trading session in Europe that saw the miners lose ground.

With no Asian macro news to drive the markets, tepid trading is set to continue, and with volumes dwindling to the same levels seen during October direction is becoming very difficult to determine and this is unlikely to change in the next few weeks.

BHP's ADR is suggesting the stock will follow its London listing lower down 32 cents to $37.48 (-0.85%) and that is despite the fact iron ore is holding at $135 US a tonne and the AUD is falling both company positives.

It illustrates my expectations perfectly, tepid trading on low volumes driven by momentum rather than fundamentals.

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