The market is down 63 points. Dow Jones down 70 on Friday. It was down 117 at worst.

The S&P 500 was down seven to 1692 and is now down 2% from its all-time high on September 18. It is up 19% for the year so far.

Economic numbers on Friday were mostly in line with expectations. The Michigan University consumer sentiment index came in at 77.5 slightly ahead of consensus (77.3) and up from last month’s reading of 76.8. They followed a week in which durable goods, initial jobless claims and pending home sales all came in better-than-expected.

European markets mostly down on Friday.

BHP and RIO down -0.94% and -1.53% on Friday in the US. BHP closed at the equivalent of down -32c on Friday’s close.

The iron ore price fell $1.90 to $131.90.

The US 10 year bond yield fell another two basis points to a yield of 2.625% as investors continue to favour defensive asset classes over cyclicals on concerns that the Fed decision not to taper implies that the US economic recovery has stalled.

The US dollar is close to a six-month low. The Aussie dollar closed at 93.15c and continues to hold above 93c.

Microsoft up 1.5% on talk that the Ford CEO will become its next CEO.

Airline stock United Continental down 9.3%.

Nike up 4.7% to a record high on the back of results.

JCPenney down 13% after a capital raising at a 7.4% discount.

RESULTS & STORIES

  • Debt ceiling negotiations continue to overhang the markets. Republicans are using the debt ceiling as leverage to demand a one-year delay in Obamacare. Obama refuses to negotiate to avoid setting the precedent that the debt ceiling is a bargaining chip for the party not in office. Congress needs to agree a funding plan by tonight or some federal services and workers will have to be suspended. Congress has two to three weeks to agree in order to avoid a full shutdown of the US government and a default.
  • There is an RBA meeting on Tuesday. Although no one expects another interest rate cut after the speculative house price bubble talk in the last month, the Aussie dollar is drifting into the meeting on concerns that they will at least make it clear that they retain an easing bias, that the A$ is still at “high levels”. The futures market is factoring in a 7% chance of a rate cut from 2.5% to 2.25% this month, a 14% chance of a rate cut in November and a 50% chance of a rate cut by the middle of next year. After the recent spike in the Aussie dollar the “dovish” tone is likely to remain. Forex traders will obviously be looking for any comments about the level of the Aussie dollar.
  • The RBA has issued a warning for the big four banks to not increase their dividend payout ratio in case of a sudden downturn in the economy. Despite this some economists are predicting banks to increase their payout ratios when they deliver their profit results next month.
  • Woolworths (WO) — CEO Grant O’Brien was paid $5.7 million last year half of what his rival Coles’ boss Ian McLeod was paid, $10.7 million. The drop in pay was due to lower long term incentive benefits, which are paid in shares and share options. Wesfarmers’ (WES) boss Richard Goyder was paid $8.5 million.
  • Spotless Group is looking to list early 2014 worth $1.5-$2 billion.
  • G8 Education (GEM) — Will raise $60 million to help open another 29 childcare centres. The placement will be at 310c a share (7% discount to last traded price). This will increase the number of places the company controls by 2,338 and will capitalise on their status as the only listed childcare centre operator.
  • Smaller banks have received a higher customer satisfaction rating than the big four. ING Direct was voted as the best bank in an online survey hosted by Mozo.com.au. ME Bank scored the title of best home lender.
  • Lynas Corp (LYC) has given an operations update. Main points — They expect production to build up through the second quarter. Output Low as equipment modifications continue. First quarter rare-earth output at “low volumes”.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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