Overnight Points of Interest
2012 May 31 by Graham Parlane
Overnight
# Equities posted mild declines, the Eurostoxx600 ending down 0.35% and the S&P500 similarly down 0.25%. The small U.S fall cemented the biggest monthly decline in 2 years. Scary European headlines were thankfully absent however weak U.S. data meant no respite from bad news. An awful close to an awful month.
# US Q1 GDP was revised down to 1.9% vs. 2.2%, as expected
# US Chicago PMI dropped from 56.2 to 52.7 versus 56.8 expected, disappointing but remaining in expansion territory
# The private ADP employment report for may came in at 133k v 113k previously. The market had expected 148k.
# A poll released overnight showed 85% in Greece want to stay in the Euro (but still don’t want to pay tax ha!)
# Dow Jones Newswires reported that The International Monetary Fund (IMF) has started discussing contingency plans for a rescue loan to Spain in the event the country fails to find the funds needed to bail out Bankia, citing people familiar with the matter.
# European inflation fell to 2.4% in May from 2.6% in April, compared with expectations of 2.5%.
# The JPY continues to defy the BOJ’s wishes, strengthening to 3 month highs (USD/JPY lows) on safe haven concerns.
# NZ and Australian wholesale interest rate yields dropped sharply yesterday amidst on-going global growth concerns. Market participants refered to the initial move as suffering from a ‘complete lack of liquidity’ and no doubt magnifying the move.
# Similarly, U.S and German benchmark 10 year bonds dropped to new lows despite the more stable tone to overnight trade, You can invest with the U.S govt. for 10 years at 1.56% and with the Germans at 1.20%
Ahead
# NZ Overseas Trade
# China Manufacturing PMI
# U.K. Manufacturing PMI
# U.S. Non-Farm Employment report.
# U.S ISM Manufacturing PMI
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
NZD/AUD – Update
2012 May 31 by Graham Parlane
All
A couple of the local banks (WBC, ANZ) have today put out ‘buy’ recommendations out on NZD/AUD in line with my thoughts (NZD/AUD – Time to buy again? – dd 25 May). The ANZ report in particular has some excellent material explaining why the NZD should be higher. Get your hands on it if you can.
However, there is one noticeable development above all, that has caught my eye and screams that the NZD is undervalued against the AUD.
That is, the increasing number of Australian firms closing arms of their business in Australia in favour of increasing operations here in NZ. I heard of another example this morning on the radio but can’t for the life of me recall who it was. However here is an Australian article dd 18 April (a little old) that explores the reasons why Woolworths, Imperial Tobacco and Heinz are part of this trend.
http://www.smh.com.au/business/australian-jobs-on-the-move-to-nz-20120417-1x5jv.html
This trend is developing because the NZD/AUD is so low and the very fact that this is happening will, in due course, bring the cross rate back to higher levels (long term average is 0.8400). Indeed one could argue that if Australian business fully embraced this new trend then the cross would ultimately be 1:1.
Regards G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Overnight Points of Interest
2012 May 30 by Graham Parlane
Overnight
# Equities fell sharply, the EuroStoxx600 down 1.55% and the S&P500 down a similar 1.45% as the negatives piled up.
# New Greek polls showed the ‘anti-bailout’ Syriza party once again back in front prompting renewed Grexit fears.
# Italy’s 10 year bond auction went poorly. Not only did they not reach targeted 6.25 bio in sales (bid for 5.73 bio were received) but they had to pay a very high price with the yield reaching 6.13%
# Spanish 10 year bond yields also soared, approaching the crucial 7.00% mark at 6.67%. The Spanish/German 10-year spread hit a fresh high around 540 bps
# As a good marker of just how panicked this market is, German 2 year bond yields hit 0.00% as investors just sought safety above all else.
# Stateside the news was no better with U.S. pending home sales declining 5.5% against expectations of a flat result.
# The USD soared, gaining strongly against all-comers bar the JPY, with the EUR crashing to new 22 month lows whilst the likes of GBP, AUD and NZD all fell heavily.
# The CRB index (a broad index of global prices) declined 1.7% overnight, to be down 11% in May to date.
# Crude oil prices plunged a hefty 3.2% (U.S Crude Light to US$88 a barrel)
# Gold bucked the commodity plunge and USD strength trends, rising moderately from an early low of US$1532 to US$1562 on safe haven concerns.
# Australian interest rate futures also jumped sharply, with the market now pricing in 0.75% of cuts from the RBA over the next 5 weeks, despite all economists surveyed yesterday (see my INSTANT VIEW – Australian Retail Sales fall) suggesting no cut will be seen in the near term. The market pricing is following on from a 0.50% cut last month and another 0.50% cuts seen in Nov/Dec 2011
Ahead
# NBNZ NZ Business Confidence
# Australian Building Approvals
# Australian Capital Expenditure (will be closely watched)
# Australian Private Sector Credit
# ADP U.S. Non-Farm Employment change
# U.S Preliminary GDP
# U.S Unemployment Claims
# Chicago PMI
# Irish Stability Treat Vote
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Overnight Points of Interest
2012 May 29 by Graham Parlane
Overnight
# Global equity markets continued their recoveries from the extraordinary selling of the past few weeks, the EuroStoxx600 up 0.75% and the S&P500 up 1.10%
# US May Consumer Confidence disappointed at 64.9 versus 68.7 previously (revised down from 69.2) and an expected 70.0
# The purportedly ‘non conflicted’ ratings agency Egan-Jones (they are funded by investors, rather than funded by issuers of debt, like Moody’s, S&P and Fitch) cut Spain to B from BB- and maintained a negative watch
# Facebook’s disastrous start as a publically listed company continued with its share’s falling 9.6% to below $30 for the first time. They debuted at $38 and rose to $45 on the first day.
Ahead
# NZ Building Consents
# Australian Retail Sales
# Italian 10 Year Bond Auction
# U.S Pending Home Sales
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Overnight Points of Interest
2012 May 28 by Graham Parlane
Overnight
# In holiday thinned markets the Eurostoxx ended down 0.1%. The U.S was closed for Memorial Day.
# With Greek polls calming nerves with suggestions of a move to the political centre, all eyes turned to Spain. Unfortunately there was plenty to worry about there. In response to the govt. giving EUR19 billion of taxpayer money to Bankia, Spanish stocks closed near 9 year lows and borrowing costs moved back up toward record highs.
# Spanish 10 year bonds hit 6.5% (it was the 7% threshold that triggered bailouts for Greece, Portugal and Ireland) whilst the Spanish/German spread hit a record 5.10%
# The EUR quickly surrendered yesterday’s sharp gains falling back from 1.2625 to 1.2540 presently.
#In a wonderful example of ‘money go round’, suggestions emerged that a close to bankrupt Spanish government might issue government bonds to Bankia in return for equity in the troubled bank, who would then present the govt. bonds to the ECB as collateral for further borrowings leaving the ECB holding the risk.
Ahead
# No major releases
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Overnight Points of Interest
2012 May 27 by Graham Parlane
Overnight
# Global equity markets were largely flat in pre-holiday thinned trade.. The Eurostoxx600 was up a touch at +0.25% whilst the S&P ended down a commensurate -0.25%
# Ratings agency S&P joined the recent fray downgrading several Spanish banks
# Large barrier options were taken out in the EUR/USD at 1.2500 but the lack of follow through suggests the market was already well short. Indeed the weekend’s IMM data showed net short EUR/USD contracts ballooned over 20 K to record high 195.4 K
# Talk circulated that Spain’s Catalonia region is unable to pay its bills.
# Domestic Greek political polls over the weekend showed voters returning to the middle ground after the ‘protest’ votes of the first election threw up a bunch of crazies from the far left and far right. It appears that the message of just what chaos and hardship could transpire if they leave the union is getting through.
# German Interior Minister says “no more German money for bottomless pit”
# IMF’s Lagarde makes it clear that IMF has no plans to relent on Greek austerity requirements
# Meanwhile away from the Euro-centric headlines , in the U.S. the University of Michigan Consumer Sentiment printed a lively 79.3 reading versus 77.8 expected.
This week
# The more important events this week are Australian Retail Sales Wed, Italian 10 year Bond Auction also Wed, NBNZ NZ Business Confidence Survey Thurs, Irish Stability Treaty Vote, Chinese Official Manufacturing PMI , U.S Non-Farm Payrolls and U.S ISM manufacturing PMI all Friday.
Ahead
# RBA Governor Stevens speaks
# Japan Monetary Policy Meeting Minutes
# There are a large number of bank holidays in Europe Monday including Switzerland, France and Germany whilst the U.S. are off for Memorial Day.
# Given the headlines out over the weekend and the holidays scheduled, the markets appear perfectly poised for a nice strong short covering rally to pare back excesses built up in what has been an incredible 4 week run of risk off.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
NZD/AUD – Time to buy again?
2012 May 25 by Graham Parlane
All
There is no doubt that world growth is slowing and early indications are that China too is slowing at a much faster rate than has previously been anticipated.
In this environment, the one currency that looks the most vulnerable to me, is the Australian Dollar (AUD). Over the last 4 years the Aussie has been a huge beneficiary of major investment flows given it’s relatively high yield, its position as a proxy for Chinese growth and its AAA sovereign rating. The ‘long’ positions must be enormous.
In November the RBA started cutting interest rates. To date they have cut a full 1% off the cash rate from 4.75% to 3.75%. During this time the RBA have remained relatively upbeat stating that although the economy was clearly ‘two speed’ (East Coast retail, finance and housing industries very weak – West/North mining booming) the spend from on-going mining investment (capex) would hold the economy in good stead. However, in the last speech on record, the RBA noted that the flow through from mining hadn’t supported the economy quite as much as they expected. Hot on the heels of that significant statement the giant corporate BHP advised that their proposed $80 billion capex program was to be pared back as they saw demand for their products waning. Not good, the last bastion of Aussie growth being undermined (pun intended).
Thus more rate cuts look likely in Australia over time. Contrastingly, whilst the data out of New Zealand has been soft of late, the hurdle to a RBNZ rate cut from the already ‘emergency’ setting of 2.5% looks very high. The likely fillip from the Canterbury situation certainly a major factor in that view. The NZD/AUD is historically very sensitive to a narrowing interest differentials. And this cross is a nice diversification away from pure AUD/USD if you’re already on that trend lower.
Technically the chart looks supportive of this view. The uptrend line off the ‘double bottom’ low of late last year looks to have held nicely this week.
NZDAUD – Click here to view chart
Cheers G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Overnight Points of Interest
2012 May 24 by Graham Parlane
Overnight
# Global equity markets fared better with the Eurostoxx600 up a solid 1% and the S&P again rallying late in the session to be up a touch by 0.15%
# It was a choppy session for currencies with the NZD rallying strongly early in the session, then falling on weak European data before rallying again as Italian PM Monti said Greece is likely to stay in the euro and a majority of the region’s leaders support issuing a joint bond to fight the debt crisis
# The Eurozone composite PMI data index fell further into contraction from 46.7 to 45.9, well lower than the 46.6 expected. The closely watched German manufacturing component was similarly disappointing, dropping from 46.2 to 45.0.
# The German IFO data (business climate) for May also came in below at 106.9 vs. 109.4 expected.
# The EUR/USD eked out fresh 2 year lows just above 1.2500 whilst 10-year German government bond yields fell to a record low of 1.35 % before moving higher late in the session
# Newly elected French President Hollande pushed ahead (with what I can only describe as stunning stupidity) with a partial repeal of the unpopular pension law. Under Hollande’s presidential decree, those who have worked for 41 years will again be allowed to retire at 60 (perhaps NZ PM Key can use this to deflect some unwanted attention to his own surprising stance) .
# U.S. Durable Goods orders increased 0.2 % last month after a 3.7 % decline in March.
Ahead
# University of Michigan Consumer Sentiment.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Break the Bank! – Could the EUR/CHF peg break?
2012 May 24 by Graham Parlane
All
Recall George Soros and how he ‘broke the Bank of England’ with his US$10 billion bet that they couldn’t hold GBP at US$2.00 ? If you don’t then I can tell you, he made his fortune, see here…..
http://en.wikipedia.org/wiki/George_Soros
Well the Swiss National Bank made a similar undertaking to that of the BoE last year effectively ‘pegging’ the CHF to a level of 1 EUR = 1.2 CHF
Here’s a chart. As you can see the market has slumped to the defence level of 1.2000 for the last couple of months (finger in the dyke stuff???).
EURCHF Daily Candlestick – click here to view chart
Ok, so as one of my well-travelled and experienced clients wrote to me this week:
Graham
Desperate is the word. The ULTIMATE safe haven is the Swissy and gold, not the USD.
Especially when there is now a strong likelihood of civil unrest in Greece, and probably France a little later down the track.
Anarchy puts a new slant on the value and accessibility of cash.
We have never since George Soros nearly rolled the BOE 30 years ago seen a government beat the market.
My money is still on the Swissy being overpowered with buyers.
So it was with considerable interest that I noted this piece from my subscription to Thomson IFR Markets today…..
BUZZ-Talk of large EUR/CHF sales overnight
May 23 8:29pm
- Trader chatter of 8 yards of EUR/CHF sold overnight @ 1.2010
- Likely that the flow contributed to 1.2620 in EUR/USD breaking
- SNB working overtime these days
So that chatter is that some fund or funds sold 8 billion EUR and bought CHF. The Swiss National Bank (SNB) do not want the CHF stronger as it hurts their exports (just like NZ). The question is why are these funds doing this if they think the SNB can defend the line?
My understanding over the years is that the market is ALWAYS bigger.
Regards G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Overnight Points of Interest
2012 May 22 by Graham Parlane
Overnight
# The Eurostoxx600 was up a very strong 1.90% however U.S markets surrendered gains of up to 1% to finish flat for the session after a late selloff.
# Comments from ex Greek PM Papademos hurt morale “risk of Greece leaving Euro is real” and “Preparations for Greece Euro exit are being considered”.
# The USD was strong in response with most currencies falling back toward recent lows. Commodities were also hit gold -1.6%, silver -1.15%; corn -5%, cocoa -2.8%, soy meal -2.5%; oil products -0.22/-1.22%.; only nat gas closed up (+3.1%).
# UK inflation data came in at the lowest level in two years (Feb 2010). Data showed headline CPI fell to 3.0%y/y (3.1% expected) in April from 3.5% previously.
# Spain held a successful auction of bills overnight. Spanish 10-year yields fell sharply from 6.28% to 6.08%, with Spanish-German spreads narrowing from 484bps to 461bps.
# Ratings agency Fitch announced its downgrade of Japan to A+ with a negative outlook.
# Facebook Inc. shares had another major fall, dropping almost 9% amid reports of underwriters cutting revenue estimates prior to the social network’s stock-market debut.
# A larger-than-expected jump in U.S. home sales was seen. The report showed that sales of previously owned homes rose 3.4% in April, adding to recent evidence suggesting the long-depressed housing market may have seen its worst days.
Ahead
# Japanese Monetary Policy Statement
# UK Monetary Policy Minutes
# UK Retail Sales
# U.S. New Home Sales
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities