Morning Note - So You Think there will be a rate rise..!

by James Gerrish 02 November 2010

                                                                                                                                                                            **02/11/10  -  8.59am  -  by James Gerrish** 

The US market remained in a holding pattern overnight with the DOW JONES adding just +6 points or +0.06% to close at 11124. The index was more than 100 points higher in early trade following on from positive manufacturing data out of China yesterday. In London, the FTSE 100 added +19 points or +0.34% to close at 5694. Locally, SPI FUTURES are pricing in a drop of 17 points when trading kicks off this morning. 



We're expecting a quite day on the market today with the RBA decision on rates due at 2.30pm following by the Melbourne Cup at 3pm. The market is pricing in only a 23% chance of a 0.25% rate rise this afternoon with the benchmark widely expected to remain at 4.50%. I'd have to agree with the consensus here based largely on the CPI data that was released last week. 

The other major event of the day is the Melbourne Cup and after watching "So You Think" win its last two starts, its hard to argue with its form. My money's on Bart Cummings and the horse that he picked up for $110,000 thats now won more than $5 million. Shocking is last years winner so has form over the 3200m (something So You Think doesn't have) but it is carrying a lot of weight (59kg) and this is an issue on a heavy track. For an outsider, Illustrious Blue might be worth an outside punt. 

Following on from yesterdays note, the Mid Term elections in th US will be decided on Wednesday evening impacting our Market on Thursday. Three scenarios could play out. 

1. If the Republicans win a majority in the House of Reps but Democrats hold the Senate, there will be very little impact on the market as thats already priced in. 

The other scenarios are likely to have more of an impact on the market. 

2. Democrats retain control in the House of Reps and the Senate - This is likely to be a negative for the market and I'd expect a sharp sell off in stocks

3. Republicans gain control of the House of Reps and the Senate - This is likely to be a positive for the market and I'd expect a sharp rally in stocks. 

Scenario's 2 and 3 are long shots. 

QE2 is the other major event playing out this week. As we've suggested before, the market is expecting about $500 billion over 6 months. I tend to think tha

Bu James Gerrish

Disclaimer

James Gerrish is an Authorised Representative (Rep No. 352904) of Shaw Stockbroking Limited ("Shaw Stockbroking"). Shaw Stockbroking is a holder of Australian Financial Services Licence No 236048. Shaw Stockbroking, its directors, officers, associates and employees each declare that they, from time to time, may hold interests in financial products and/or earn brokerage, commission, fees or other benefits from financial products mentioned in this e-mail or attached documents. Unless specifically stated within this page or an attached document, any information communicated by this e-mail constitutes unsolicited general financial product advice which has been compiled without regard to any investor's individual objectives, financial situation or needs. It is not specific advice for any particular investor. Before making any decision about the information provided, you need to consider the appropriateness of this information having regard to your individual objectives, financial situation and needs and consult your adviser. Any indicative information and assumptions used here are summarised and also may change without notice to you, particularly if based on past performance or relate to a future matter.
 

Subscribe to our Daily Newsletter?

Would you like to receive our daily news to your inbox?