Morning Note - All eyes on FOMC next week

**29/10/10  -  9.13am  -  by James Gerrish** 

I'd be expecting a flow of broker upgrades filtering through for ANZ today after yesterdays stellar result. One interesting point that UBS has highlighted about the ANZ numbers was the strong profit margin expansion of 51 basis points (0.51%) since the start of 2008. This has raised the question of sustainability when the sector as a whole has expanded by 7 bp (0.07%). Never before has a major sustained such a margin advantage over its peers. This implies a number of things which I won't go into here but the upshot is that after we let the euphoria surrounding the banks results and the market reaction subside, we may suggest to rotate out of ANZ into Westpac (or to a lesser extent CBA). 

On the US market last night, the DOW JONES lost -12 points or -0.11% to close at 11113. In London the FTSE 100 added +31 points or +0.56% to close at 5677. Locally, SPI FUTURES are pricing in a drop -6 points when trading kicks off this morning. 

One of the interesting things that occurred last night (and is really a continuation of a recent trend) was the rising yield in the US 10 year Treasuries even as QE2 approaches. You can take a number of things out of this. The bears would say that Bond Investors are pulling money out based on the assumption that QE2 is going to more conservative than the market had already priced in. In fact, yields are almost the same level as they were before the program was announced so this assumption has some merit. This raises the question however of where money is flowing to, if it’s coming out of bonds. One to ponder over the weekend!! 

A big week in the market next week with the Federal Open Market Committee Meeting (FOMC) announcement on Wednesday the major focus. Employment data will also be interesting which is due out Friday. 

Macquarie Bank Released results this morning and looks a good result for mine.