Speaking of banks, the sector is leading a stronger ASX this afternoon, in a month that is usually positive for the big four. 

Banks ex-diversified financials rise 4.01 per cent on average in the month of October, according to Bell Potter's Richard Coppleson. It's head and shoulders ahead the next best, diversified financials, which lift 2.59 per cent. 

But it's a different story come November, when the banks fall 2.46 per cent. 

"Looking back to 2000, we can see the banks rally strongly in October in the lead up to their dividends," Coppleson writes in his daily Coppo Report, adding they tend to underperform in the lead up to their ex-dividend date. 

"It's important to realise that the run ­up has been fluctuating earlier for the banks, with the peak often occurring well before the ex­-date, with the banks then selling off in the final weeks just before their ex­-date," he says.

In other words, traders are playing the seasonality and are increasingly heading out the door sooner to beat the rush.  

For the record, here are the ex-div dates for the big three (CBA reports in August) as they prepare to report full-year profits:

National Australia Bank: 4 November

Westpac: 14 November

ANZ Banking Group: 14 November

Our banks are often ranked among the world's most profitable lenders, but there's one area where they appear to be lagging some big global peers: the incentives they pay staff.

With regulators grumbling about the cultural problems in finance for a few years now, several big banks overseas have taken the knife to conflicted bonus payments, which many see as the root of the sector's cultural problems.

HSBC replaced sales targets for front-line staff back with customer satisfaction targets in 2013, following a move by Barclays in 2012.

RBS, led by former Commonwealth Bank executive Ross McEwan, also scrapped bonuses for its retail bankers in November last year, raising fixed pay among 20,000-odd staff to compensate them.

Our own banks launched an inquiry into remuneration earlier this year, but they have been slower off the mark reacting to public concerns about the role of bonuses in pushing staff to sell products, known as "cross-selling".

This is one of the insights provided in a submission from several leading consumer groups to the Australian Bankers' Association's review of remuneration in retail banking.

The review, announced in April, is looking at commissions and other type of payments that reward bank staff for hitting sales targets or for referring a customer to a financial planner.

The submission, from the Consumer Action Law Centre, Financial Rights Legal Centre and Good Shepherd Microfinance, argues for a sweeping overhaul of the bonus systems that reward staff for hitting product sales targets. To support their case, the groups highlight overseas economic studies that provide hard evidence of what damage a poorly designed bonus scheme can do.

Read more.

Australia's most successful hedge fund manager and a backer of the Brexit campaign says Britain's next generation will be better off after exiting the European Union.

Sir Michael Hintze, the billionaire founder of London based credit hedge fund CQS, said Britain faced risks if it chose to leave or stay but his support of the controversial vote was "all about sovereignty and the ability to control one's destiny".

"My sense is within five to 10 years Britain will be no worse off and I sense within a generation it will be better off," he told The Australian Financial Review. 

Hintze, a well known contributor to conservative governments, donated £100,000 to the campaign but said he did not take an active role in pushing the case to leave.  

The contribution is less than the donations made by others like Goldman Sachs and other [hedge] fund managers like Winton's David Harding to the remain campaign. 

As debate in Britain centres around whether the country should engage in a "hard" or "soft" Brexit, Prime Minister Theresa May, he says, is "very much a believer in democracy and [she has made it clear] her view is that the people have spoken, it's time to go."

CQS now manages $US12 billion and Hintze manages the Directional Opportunities Fund. The fund is having another strong year and is believed to be up by more than 20 per cent, year to date.

The key call, Hintze says, was made at the start of the year – to have realised a systemic collapse was not likely on China and commodities when the market had grown increasingly fearful on both fronts.  

"If you looked at the global consumption curve of oil – it couldn't go to $US100 [a barrel] but by the same token it couldn't go to $US10 for a sustainable period of time," he said.

Here's more ($)

Whitehaven Coal's shares dropped as much as 4 per cent this morning after Credit Suisse downgraded the stock to 'underperform', saying coal prices have probably peaked and the stock is looking expensive after its 300 per cent rally over the past six months.

Analyst Paul McTaggart reckons met coal prices have peaked in this quarter.

"High prices will entice re-starts of shuttered capacity and increased washing of met coals that have been recently sold as unwashed thermal coal."

Thermal coal has also likely peaked, he says, as China looks to loosen the restrictions which caught the market unawares and drove up imports and prices.

McTaggart predicts financial-year 2017 earnings will be the peak for Whitehaven in this coal price cycle, with earnings per share in financial year 2019 falling by close to 60 per cent.

"With the WHC share price up about 800 per cent since February 2016 lows (37.5cps) we find it hard to see much upside from here," he says.

Credits Suisse downgraded the stock from neutral but lifted the target price to $2.80, from $2.45. It's currently at $2.93, down 1.35 per cent for the day.

Meanwhile, Morgan Stanley is sticking with its 'overweight' recommendation and has a price target of $3.10, saying the benefit of higher contract prices is yet to fully kick in.

"Whitehaven has had a strong run and the lower met coal volume, lagged price benefit and lower thermal realisation may be used by some to rationalise a reduced exposure," analyst Brendan Fitzpatrick says. "We re-emphasise the volume growth, product mix and price realisation benefits yet to come through as Maules Creek ramps up.

"Coupled with elevated prices, Whitehaven should rapidly accumulate cash which we expect to support the equity."

How's this for a big call: the Australian dollar is likely to hit US85¢ within five years and could trade as high as US90¢ because US interest rates aren't going to rise as much as expected, according to one of the world's bigger private equity funds.

The director of research for the Carlyle Group, economist Jason Thomas, who was in Australia last week to brief the investment giant's clients, said the US economy has been hit unexpectedly hard by a drop in oil and gas prices, which is hurting investment.

A reduction in business investment is likely to mean that US interest rates aren't going to rise a lot compared with other countries, he said, which means the US dollar is likely to fall.

"The US was the first into the tightening cycle and it is going to be the first to end the tightening cycle," he said in an interview.

"The net impact of the oil bust ... is probably negative. The US economy appears to have decelerated by much more than most external observers perceive."

A weakening US economy would likely drive up the Australian dollar, hurting the RBA's strategy of stimulating exports by cutting interest rates to 1.5 per cent, which has pushed the dollar down to around US76¢. But if other currencies also rise against the US dollar, the hit to Australian trade could be muted.

Mr Thomas said the US dollar will fall between 8 and 15 per cent, driving the Australian dollar to US85¢, or even higher in the coming five years. "Ninety [US90¢] seems possible," he said.

Mr Thomas said earnings of companies in the S&P 500 share index of leading stocks had fallen for five consecutive quarters. "That's the first time we've seen that out of a recession," he said.

The message from the Reserve Bank is clear: it's all about growth at the moment.

The minutes of the RBA board's October 4 interest rate meeting concentrated on the economy's momentum, conditions in the jobs market, and risks in the housing market - all of which ultimately affect inflation - but made few direct mentions of the inflation rate itself.

Whether by accident or design, the focus is in line with the main problem facing the RBA: getting the economy growing quickly enough to lower the unemployment rate.

The central bank judged the prospects for growth as remaining reasonable and was content to sit on the fence until September quarter inflation data became available.

"This would provide an opportunity to consider the economic outlook, assess the effects of two previous reductions in the cash rate and review conditions in the labour and housing markets," the minutes of the RBA's October meeting said.

As it was Philip Lowe's first major speech as RBA chief, pundits were looking not only for orientation on interest rates but also on differentiation from his predecessor, the usually very reserved Glenn Stevens. And they weren't disappointed as Lowe made some unusually frank remarks on the US elections.

The governor said if Donald Trump were to win next month's US presidential election it would be more of a shock to financial markets than the Brexit vote in June, which in hindsight was "benign".

In response to an audience question, Lowe said the bank had not done particular scenario planning for a Trump presidency, something that is unlikely, according to polls. However, the RBA does develop a "generic" response for potential "major financial disturbance".

While Brexit caused volatility in share prices and a plunge in the pound, regulators such as the RBA have concluded it was "benign" because it did not cause stress in credit markets used by banks to fund themselves.

Lowe also said his biggest global concern was the threat of rising protectionism and a decline in support for globalisation.

"We thought about this in Brexit but that turned out to be a fairly benign event in markets. The possible election of president Trump I suspect wouldn't be as benign event, but we don't have a Trump plan, what we do is have a generic response plan to a whole range of shocks," Lowe said.

The comments came as Lowe indicated his top concern about the world economy was the declining support for globalisation.

"If I go through the list of things that make we worry about the global economy … right at the top of that list is the shift towards protectionism," he said in response to another question.

"I suspect that the high-water mark for support for open markets is probably behind us, and the Australian economy has benefited greatly over decades from open markets. The global economy has also benefited, and if we're inching away from that I think that's problematic for us all."

Economists are putting out their reactions to this morning's speech by RBA governor Philip Lowe, with UBS economists highlighting the importance Lowe placed on upcoming inflation data:

Overall, Lowe's comments suggest that if worries over housing/leverage abated and the labour market deteriorated – while inflation remained low – we think there is risk of further easing over the medium-term.

Lowe sees both the housing and labour markets as "mixed", and "there has been some lessening of the [leveraging] concerns that were building up last year". However, we still think the RBA will remain on hold ahead, particularly given housing is likely stronger than the RBA thinks (and see UBS housing 'supply tracker': upgrading again… the boom is even bigger).

For the near-term policy outlook, Lowe put weight on "important" Q3 CPI data [on Oct 26], which points to a still "reactive" policy function if inflation misses materially. Indeed, Lowe highlights that the rate cuts this year were "not in response to concerns about economic growth".

ANZ economists point out the governor expects inflation to stay low, but that Lowe reinforced the flexible nature of the target:

The key considerations for policy continue to be inflation and the housing and labour markets. Inflation expectations are also important. 

With inflation set to stay low for an extended period, we believe the RBA holds an easing bias tempered by concerns over financial stability. Actual inflation and labour and housing market data are the key data to watch.

We expect next week's Q3 CPI report to show that average underlying inflation remains low (+0.4% q/q, +1.5% y/y), broadly consistent with the RBA's forecasts. A material surprise in Q3 inflation would be significant, although we expect that in this scenario the Bank would be more likely to wait for more data on the economy (Q3 GDP in early December, and more information on the labour and housing markets) to further evaluate the impact of the rate cuts in May and August.

Like their peers, CBA said upcoming inflation numbers are crucial, but also:

[Lowe] spoke about the feedback loop between actual inflation outcomes and inflation expectations. Specifically, how low inflation outcomes mean that workers have agreed to lower wage outcomes, which is turn have reinforced low inflation outcomes. We recently wrote on the topic here.

Given the importance of actual inflation for inflation expectations, next week's Q3 CPI will be an important update. In our view, an underlying CPI of 0.3 per cent or lower will trigger a rate cut at the November meeting. 

Lowe presented some new RBA research on wages growth in Australia. The research looks at wages for all 18,000 jobs that the ABS uses to calculate the wage price index. The RBA found that there has been a decline in the frequency of wage increases, and that when wage increase do occur, the average size is lower. The share of employees getting a wage increase of 3-4% and more than 4% has declined sharply over the past 4 years. Wage increases of 0-2% and 2-3% and now the most common. 

Oil Search has posted a 16 per cent increase in quarterly revenue on the back of an increase in LNG and gas prices and higher production from the PNG liquefied natural gas project.

The oil and gas producer has reported total revenue of $US309.5 million for the three months to September 30, up from $US267.7 million in the June quarter.

The Papua New Guinea-focused company said total quarterly production was up 6 per cent at 7.63 million barrels of oil equivalent (mmboe), while sales volume rose four per cent to 7.49 mmboe.

Shares are up 0.2 per cent at $7.08.

Deutsche Bank analysts have upped their call on Crown to "buy", echoing their peers at Credit Suisse by stating that the market reaction looks "excessive".

"Following the detention of Crown's VIP employees in China, we estimate that VIP turnover will decline by 20 per cent in FY17 with Chinese turnover down 30 per cent," the DB analysts write.

"We believe the market is now pricing in a 70 per cent reduction in VIP turnover and a 100 per cent decline in Chinese VIP turnover, which we view as excessive. A similar situation for the Korean casino operators in 2015 resulted in a 17 per cent decline in VIP turnover and a 31.5 per cent reduction in Chinese VIP turnover in the subsequent 12 month period."

The Deutsche team lower their price target on the stock to reflect the expected fall in earnings, to $13.75 from $14.35, but point out that the stock is trading well below that reduced valuation.

The also provide some more detail on the Korean experience:

"In June 2015, 13 gaming managers from the Korean casinos and 34 of their Chinese agents were arrested across Beijing, Hebei, Shanghai and Jiangsu for allegedly luring Chinese gamblers to foreigners-only casinos in South Korea.

"In the subsequent quarter, Chinese VIP turnover declined by 46 per cent with total VIP turnover down 29 per cent. In the subsequent 12 month period, Chinese VIP turnover declined by 31.5 per cent with total VIP turnover down 17 per cent.

"Crown could also experience some credit collection issues in the near term as its employees are in detention and the risks are that the impact is more pervasive across the VIP (junket and direct) and premium mass segments."

Shares are experiencing another soft start to the day's trade with a lack of conviction the main theme. The Aussie dollar has held at around 76.3 US cents this morning following a speech from the new RBA governor Philip Lowe, which suggested he was pretty comfortable with where the currency was trading.

Big miners and banks are mixed, and so is the ASX 200 overall, which is up a handful of points at 5393. Yesterday's biggest loser, Crown, is enjoying some support after Citi analysts said it looked oversold (see previous post) - the stock is 2.2 per cent higher.

Challenger is the early winner, climbing 4 per cent after providing an operational update that has pleased the market. Caltex's announcement that it will be bidding for Woolies' petrol stations has pushed the stock down 2.6 per cent.

Whether related to that bid or not, it's the supermarket owners who are giving the greatest support to the broader index, as Woolies and Wesfarmers add 0.7 per cent. The real estate stocks that were sold heavily yesterday are enjoying a little bounce, as Scentre Group climbs 0.8 per cent and Westfield 0.9 per cent.

Gold miners are doing well - Newcrest is up 1.4 per cent, while Regis, St Barbara and Evolution are among the best performing names this morning.

Tatts Group and Tabcorp shares have been placed into a trading halt, ahead of an announcement on "potential change of control".

The AFR's Street Talk column is reporting that the two gaming companies are re-visiting merger discussions held last year. 

Tatts had brief talks with Tabcorp about combining the pair's businesses, which would have created a $10 billion wagering giant. 

However, the pair failed to agree on an appropriate merger ratio, and Tatts and Tabcorp went back to their regular business. 

It's understood Tatts' board and Tabcorp have been back considering their options and potential valuations, Street Talk says, adding sources said the pair were in talks and had not yet agreed a deal or a merger ratio. 

The two companies' requests for trading halts were almost identically worded. 

"The trading halt is requested pending the outcome of discussions in relation to a potential change of control transaction pursuant to a scheme of arrangement that is under consideration by Tabcorp," Tabcorp's statement to the ASX says.

Both Tabcorp and Tatts said the trading halt would remain in place until the beginning of trade on Wednesday. 

One more on inflation: New Zealand consumer price growth slowed less than economists forecast in the third quarter, prompting the kiwi to jump.

Consumer prices rose 0.2 per cent in the third quarter, down from 0.4 per cent in the previous three months but more than the flat growth economists were predicting. Over the year, prices rose up just 0.2 per cent too, a bit higher than the forecast 0.1 per cent.

Economists expect RBNZ Governor Graeme Wheeler to respond to persistently weak inflation by cutting the official cash rate to a record-low 1.75 per cent at the next review on November 10, even amid an overheated housing market and economic growth that's among the developed world's fastest.

Annual inflation has been below 1 per cent for eight straight quarters and the RBNZ doesn't see it returning to the centre of its 1-3 per cent target band until mid-2018.

"Overall the third-quarter New Zealand inflation report reduces odds of more RBNZ rate cuts beyond November which will support kiwi in the near term," Elias Haddad, a senior currency strategist at CBA said. "A 25 basis point in November is virtually fully priced in our base case scenario."

Futures are pricing in an 80 per cent chance of a rate reduction in November down from 84 per cent Monday.

The currency rose as much as 0.7 per cent to 71.81 US cents, while the Aussie dollar slipped 0.5 per cent to $NZ1.0645.. 

Moving from the human aspect to the market angle of the Crown developments in China, Citi analysts are telling clients this morning to buy the stock following a 14 per cent plunge to $11.15 yesterday.

The analysts reckon investors have over-reacted to the news and say the stock is potentially oversold. Its trading up 2.4 per cent this morning at $11.42.

Citi said the recent events would be disruptive to Crown's VIP business over the next 12 to 18 months and now expect an 8 per cent decline in year-on-year VIP revenue for the 2017 financial year and 4 per cent in fiscal 2018. 

"Our valuation and price target reduces to $15.10 from $15.35," the analysts told clients. 

"We view today's price reaction as a potential over-reaction," they say, noting that the steep fall has "has effectively wiped out the value of Crown's entire VIP business".

"Given that we believe these issues largely relate to CWN's direct VIP business (i.e. we believe CWN's junket relationships will remain intact), which on our estimates represents around 4 per cent of CWN group EBITDA.

Citi expects Crown to given an update on its demerger plans at the annual general meeting later this week, along with a trading update. 

Credit Suisse analysts, however, were more cautious, trimming their price target and reiterating their "neutral" call. 

"This appears to be a Crown-specific issue," Credit Suisse's gaming team told clients. 

"No other casino had staff taken into custody. We consider reputational risk results in a temporary avoidance of players and junkets to use Crown facilities followed by a multi-year recovery."

They reduce their target price for the stock  to $12.30 to reflect a 15 per cent drop in FY18 VIP revenue, as they factor in "reputational risk as players and junkets potentially avoid CWN temporarily. Also, CWN may have to adjust its operations in China. Liquidity risk may increase."

 

Billionaire gaming mogul James Packer has broken his silence over the arrests of workers from his Crown Resorts casino business in China.

On Thursday, 18 Crown employees were arrested in China including three Australian citizens.

In a statement released this morning Mr Packer said that "as the major shareholder of Crown Resorts, I am deeply concerned for the welfare of those Crown employees detained in China"

Mr Packer said he had sought regular updates on the issue and had "asked Crown to do everything possible to contact our employees and to support their families, as we await further details from Chinese authorities".

"I am respectful, that these detentions have occurred in another country and are therefore subject to their sovereign rules and investigative processes. 

"Crown will do whatever it can to support our employees and their families at this difficult time. Our number one priority is to be able to make contact and to ensure they are all safe."

The company held an emergency board meeting on Monday night and was briefed on the situation by Crown chief executive Rowen Craigie.

Fairfax Media has learnt that police are preparing to charge the 18 Crown employees arrested across China with organising gambling activities for mainland nationals overseas. 

Sources familiar with the investigation told Fairfax Media the line of inquiry has focused on the sales and marketing activities of the 18 staff of James Packer's casino empire, and the inducement and facilitation for Chinese nationals to travel to Australia to gamble.

"Under our country's laws, it is not just gambling and opening casinos in China which fall under gambling crimes," said one source, who declined to be named because of the sensitivity of revealing aspects of an ongoing investigation. "If you organise or introduce our country's citizens to go overseas to gamble, if it's more than 10 people then you will face criminal liability."

Read more.

Caltex Australia has finally confirmed that it has made an offer to buy Woolworths' petrol station business just as rival BP is understood to have edged in front in the race for the circa $1.6 billion network.

The fuels supplier said it had  made "a conditional and confidential proposal to Woolworths to acquire its fuel business and continue the successful fuel alliance."

But as reported in The AFR's Street Talk column earlier this morning, UK-based oil giant BP is understood to have its nose in front in the negotiations after the submission of indicative bids and feedback from the vendor, which confirmed late last month it was evaluating proposals for the business.

Caltex chairman Greig Gailey has already made it clear the company will be particularly disciplined in its approach to acquisitions in its core market given expectations of a shrinking fuels market due to improved fuel efficiency in the short term, and to the introduction of electric vehicles further down the track.

"Caltex will maintain financial discipline in this process and remains focussed on the creation of top quartile total shareholder returns, driven by profitable, capital efficient growth," the retailer and marketer said in its statement.

As the exclusive supplier of petrol and diesel to Woolworths, Caltex knows the business well. But it is sure to attract the interest of competition commission chairman Rod Sims, who has let it be known he will be scrutinising any acquisition deal for its impact on what he already sees as a fairly concentrated market.

The acquisition of Woolworth's petrol business could lift Caltex's annual earnings per share by 3.4 per cent if it secured the deal for 10.5 times earnings, Macquarie's equities research team has calculated.

Caltex said on Tuesday any transaction "remains uncertain and is expected to take time to complete." It added it would update the market if there were any material changes to its existing wholesale supply arrangements with Woolworths.

Central bank watch No. 2, and one of the local highlights this morning: RBA governor Philip Lowe has mounted a robust defense of the flexibility available in the central bank's inflation target, saying employment and financial stability are also key factors in deciding interest rates.

"We have never thought of our job as keeping the year-ended rate of inflation between 2 and 3 per cent at all times," Lowe said in a speech, his first since taking the helm at the RBA. "Given the uncertainties in the world, something more prescriptive and mechanical is neither possible nor desirable."

Lowe described the current environment as a "complex picture": inflation is subdued and wage growth weak, even as the economy copes with the drag of falling mining investment and unemployment is falling. A key issue is the speed at which policy makers try to return inflation to target because trying to do it too quickly could threaten financial stability by inciting a new round of borrowing by heavily indebted consumers.

"The board has paid close attention to developments in household balance sheets and the housing market," Lowe told a Citi investment conference, referring to the decision to ease in May and August. "Over the course of 2016, there has been some lessening of the concerns that were building up last year."

On housing, which is one sector of the economy at greatest risk of a blow out if rates are cut too low, Lowe described the picture as "mixed".

"Prices seem to be increasing quite briskly again in some areas, although are falling in others. Growth in rents is very low and there is a big increase in housing supply still to come. 

"To add to the picture, credit growth is still exceeding income growth, although by a smaller margin than last year. It is also noteworthy that much of this credit is being used to finance new housing construction rather than consumption. It is a complex picture."

But the governor also noted the rebound in commodity prices that are critical to Australia's national income, and that business and consumer confidence are a bit above average. He also flagged that the unemployment rate has fallen to 5.6 percent, and the lack of price pressure suggested there was spare capacity in the economy; indeed, RBA staff estimate the economy is about half a percentage point away from full employment.

As to weak inflation worldwide, Lowe cited three main causes:

• slack in the global economy
• weaker headline inflation triggered by falling commodity prices, particularly oil
• a structural change caused by globalisation, that means because of technology and competition workers are worried about pricing themselves out of the market with higher wages and therefore aren't seeking them

"The low inflation outcomes around the world have posed some challenges for policy frameworks, including inflation targeting," Lowe said. "But our flexible medium-term target has served us well. The Reserve Bank can contribute to stability and confidence in the Australian economy by continuing to be guided by this framework."

Central bank watch #1: the Federal Reserve is "very close" to its US employment and inflation targets, Fed vice-chair Stanley Fischer said overnight, as he warned against making rash changes to the policy framework in an effort to boost economic growth.

Fischer, speaking to the Economic Club of New York, mapped out a world where low growth hamstrings central banks from effective recession-fighting, and said the US economy may face longer and deeper recessions in the future if interest rates remain stuck at current low levels.

Asked about the notion of raising the Fed's inflation goal to 3 per cent from the current 2 per cent, the No. 2 US central banker said he was "not enthusiastic" about such tinkering.

"We are very close to our targets" of maximum sustainable employment and 2-per cent inflation, he said. "To change that target if you are so close, that's a problem."

The dollar and stocks fell slightly while US Treasury yields added to earlier declines after Fischer's speech, in which he also said the Fed should not aim to overshoot its employment target with too much stimulus.

On Friday, long-dated bond yields also rose after chair Janet Yellen said the Fed may need to run a "high pressure" economy to heal damage from the 2007-2009 recession.

The Fed raised interest rates from near-zero in December, its first monetary policy tightening in nearly a decade, and it has since stood pat as US economic growth weakened, with risks seen to have grown overseas. Still, policymakers expect to hike rates again before year end.

Fischer acknowledged that "having very low interest rates makes monetary policy more difficult," especially if faced with a recession.

Though Fed officials would still have tools such as quantitative easing and forward guidance if rates remain low, he said, "these alternatives are not perfect substitutes for conventional policy. The limitation on monetary policy imposed by low trend interest rates could therefore lead to longer and deeper recessions when the economy is hit by negative shocks."

However, it is "not that simple" for the Fed to coax interest rates higher in a world where, central bankers believe, an aging population, weak demand and low investment may have undercut the country's and the world's economic potential, Fischer said.

Fischer said that government policies could help partly counter the impact of lower productivity and an aging population. He argued that a combination of "more encouragement for private investment, improved public infrastructure, better education, and more effective regulation is likely to promote faster growth of productivity and living standards".

The local sharemarket looks set to open flat to slightly weaker after US and European markets drifted down overnight, says IG strategist Chris Weston.

Here are his eight main takeaways from the overnight action:

1. Wall Street: There's not a huge amount to inspire this morning, with the S&P 500 drifting modestly lower on light volumes, although price is still holding above the key 2116 level. Small losses seen in the discretionary, telco and financial space, despite Bank of America trying it best to keep the space in positive territory after reporting above-consensus numbers.
2. US earnings: US equity futures have done very little in after-hours trade, with numbers from IBM (a 5.8 per cent weighting on Dow futures) failing to drive the broader futures market. IBM is now trading slightly lower in the after-hours as I write, despite reporting its biggest third-quarter earnings beat in five years. Netflix on the other hand has absolutely blown expectations for domestic net subscriber (Q3 and Q4) out of the park, with price up a lazy 20 per cent in after-hours trading.
3. Local market moves: Locally, we see the the Asian equity markets opening on a flat to slightly negative note, with the Nikkei the likely underperformer due to the pullback below ¥104 in the US dollar/yen. An interesting catalyst today should be seen in the Chinese yuan (CNY) fixing at 12.15pm AEDT and moves in the Australian 10-year government bond as well.
4. Aussie fixed income: While the ASX materials and financials sector show little in the way of focus on the Australian bond market, it's interesting to see the utility, REITS and telco sectors are moving inversely to yield almost tick-for-tick. One suspects then if we see buyers in Aussie fixed-income today, in line with moves in the US bond market, then we may see some buying in these yield sensitive sectors too.
5. London: Staying in the index space and as a trade, I'd be keeping an eye on the FTSE 100, with price failing last week to break the 2015 highs on a weekly basis and clear divergence seen with the oscillators, suggesting the highs have been seen for now and a pullback could be on the cards. The British pound/US dollar cross has held firm, although to be fair we haven't really seen much in the way of volatility in foreign exchange markets.
6. Commodities: The low intra-ranges have also extended into commodity markets, which won't surprise, although good buying has been seen again in the spot iron ore market, with price gaining 1.9 per cent to $US58.30. Iron ore (Dalian) futures are probably the leading light though and they fell 1.9 per cent, so the chances are spot iron ore will settle lower later today. Oil prices have moved a touch lower, with focus on Libya and Iran output quota, while the Baker Hughes US rig count also increased a further four rigs to 432 (up 36 per cent since May). However, I wouldn't read too much into this overnight news flow, but it does seems that oil is in need of a fresh catalyst to push it through the June highs.
7. Local data: RBA October meeting minutes, ABS new motor vehicle sales (Sept.), NZ Q3 CPI.
8. Overseas data: Hong Kong unemployment (Sept.); European Central Bank bank lending survey; UK inflation (Sept.); US consumer prices (Sept.), US NAHB homebuilder confidence (Oct.) and Treasury net international capital flows (Aug.)

Here's the overnight scoreboard:

• SPI futures up 3pts or 0.1% to 5372
• AUD +0.2% to 76.24 US cents
• On Wall St, Dow -0.3%, S&P 500 -0.3%, Nasdaq -0.3%
• In Europe, Stoxx 50 -0.5%, FTSE -0.9%, CAC -0.5%, DAX -0.7%
• Spot gold +0.4% to $US1256.15 an ounce
• Brent crude -1% to $US51.44 a barrel
• Iron ore +1.9% to $US58.38 a tonne
• LME aluminium -0.9% to $US1660.5 a tonne