10 December 2014
# Australian Westpac Consumer Sentiment
# Australian Home Loans
# China CPI
# China Producer Prices
# European stocks were hammered, the EuroStoxx 600 Index falling 2.3% at the close of trading, capping its largest 2 day decline in more than 7 weeks. Turmoil in Greece reverberated across the continent as the Greek ASE stock index fell an incredible 13% as the Greek government announced that voting for a new president will begin next week. Across the Atlantic U.S. stocks fell sharply by mid-session, the Dow down 218 points at one stage before a significant rally took place, cutting losses by more than half and indeed, in the case of the Nasdaq, moving into positive territory. With 45 minutes until the close the S&P500 is down just 0.23% and the Dow down 0.45% (80 points).
# The U.S. JOLTS job openings appears partly responsible for the equity markets mid-session bounce. According to the new Job Openings and Labour Turnover Survey, US employers had 4.834 million job openings in October. This was up from 4.685 million in September, and it was higher than the 4.795 million expected by economists. Job openings now are larger than any month during the housing bubble economy years 2004 to 2007.
# The National Federation of Independent Business (NFIB) index of small business optimism rose to the highest level since February 2007 in November. Optimism increased to 98.1 last month from 96.1 in October. Analysts had expected the index to rise to 96.6 in November.
# NZ’s Fonterra slashed its current year forecast to NZ$4.70, an incredible 8 year low, only a year after a record $8.40 pay-out. The dairy giant noted that there is “still considerable volatility in global dairy markets “ and “ global milk supply remains greater than demand’. They went on to say “ the lower pay-out will put pressure on farming business budgets”. After a sharp overnight rally the NZD was punished, although the update should not really be a surprise. In a volatile nights trade the NZD rallied from a 0.7610 low to 0.7770 before the news took it back to 0.7670. Wow !
# Remaining with currencies, the USD/JPY traded an even bigger range dwarfing the ‘kiwi’s’ wild session. From above 121 the pair fell just below 118. The factors for the extraordinary fall are hard to pinpoint. Amongst developments ratings agency Fitch placed Japan’s ‘A+’ long-term local & foreign currency IDRS on rating watch negative (that should be JPY weakness not strength?), a fall in U.S. yields and a very ‘long’ market.
# China stepped up efforts to curb the expansion of local-government debt, sparking a tumble in riskier bonds and fuelling the stock market’s biggest retreat in five years. Authorities announced further policy measures, including curbs on excess local-government debt. Bonds rated below AAA, or sold by issuers graded lower than AA can no longer be used as collateral in repo agreements.
# German 10-year bond yields slid to new historic lows, at 0.68%.
# Gold jumped to 6 week highs as declines in equity markets revived demand for the metal as a haven(more than $100 billion was wiped from the value of world equity markets yesterday). Silver surged more than 5%. Meanwhile West Texas Intermediate and Brent crude climbed from five-year lows as the dollar fell. Futures climbed as the U.S. currency dropped from the strongest level in 2 years versus the euro. A weaker dollar bolsters the appeal of raw materials as a store of value. WTI for January delivery rose 77 cents, or 1.2%, to settle at $63.82 a barrel. The contract closed at $63.05 yesterday, the lowest settlement since July 2009. Prices are down 35% this year.