2 December 2014
# ANZ NZ Commodity Prices
# Australian Building Approvals
# Australian Current Account
# RBA Cash Rate Announcement
# UK Construction PMI
# U.S. Fed Chair Yellen speaks
# NZ GDT Auction
# Disappointing manufacturing data from China and Europe set the tone for European equities, sending theStoxx600 to a loss of 0.46%. Meanwhile U.S. manufacturing data was mixed and the Black Friday start to the shopping season somewhat soft which consigned U.S. bourses to lower levels. The blue chip Dow was the least affected, down just 0.17% going into the close, The big board S&P however was down 0.58% whilst the tech heavy Nasdaq was hit a more significant 1.19% after Apple Inc. shares were clipped, the tech giants shares falling as much as 6.4% at one stage.
# Following on from China’s underwhelming, but still positive manufacturing PMI’s yesterday, European manufacturing PMI’s were generally poor. Indeed, the final reading for Germany’s manufacturing PMI in November came in at 49.5, well below the ‘flash’ reading of 50.0, and the lowest reading in 17 months. This took the pan-European reading down from 50.4 to 50.1, precariously close to the boom/bust fulcrum.
# U.S. manufacturing data tossed up mixed readings. The Markit manufacturing PMI was marginally disappointing at 54.8 vs 55.0 expected, however this was outweighed by the more highly respected ISM survey printing at 58.7 vs 58.0 expected. The better headline reading of the ISM was negated however by the ‘prices paid’ quotient which collapsed to 44.5 from 53.5 on weak energy prices.
# The Fed’s 2IC Fischer veered to the hawkish side saying that “ lower inflation from lower oil prices will be temporary” and “there’s a significant chance that U.S. wage inflation is about to pick up”.
# Moody’s Investor Service downgraded Japan's debt in the wake of the Prime Minister Abe's decision to delay an increase in sales tax. The ratings agency said the debt rating was lowered by one notch and takes Japan's rating to Aa3 from A1. Its statement cited "heightened uncertainty" about the government's ability to meet its debt reduction goals and uncertainty about the timing and effectiveness of measures to boost economic growth. Japan, the world's third-largest economy, has the heaviest debt burden among developing nations. The agency dropped Japan by one notch to A1, taking it one notch below China and four below Aaa-rated Germany and the US. Somewhat ironically the JPY strengthened.
# Commodities put in a much needed positive session led by some post Swiss referendum Gold price madness. Monday in Asia is often fraught with danger and yesterday was a classic example. Despite the fact that no one thought the Swiss vote (for the SNB to hold more Gold) would pass Gold was sold heavily, most likely helped by the stunning collapse in oil prices Friday. The move was a ‘red herring’ however with gold more than reversing Friday’s and Mondays 4% declines to put in a massive upside session, rising from low too high, a massive $78.00 or 6.82%. The move no doubt prompted some profit taking/bargain hunting in the Crude complexes and we’d now not be surprised to see a better period for commodities ahead in the near term.