Overnight Points of Interest

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29 August 2014

Posted by on 29 August 2014

Good Friday morning

Ahead

# N.Z.Building Consents

# Japan CPI

# Japan Industrial Production

# Japan Retail Sales

# N.Z. ANZ Business Confidence

# Australian Private Sector Credit

# Eurozone CPI

# U.S.Chicago PMI

Overnight

# European stocks took a hit with new deflationary readings from some member states whilst renewed Ukraine tensions further soured proceedings. After a bright start to the week the Stoxx600 gave up 0.66% over the session. Likewise U.S. stocks snapped a 3 day winning streak despite a better than expected revision to U.S. Q2 growth. In continued light trade the S&P500 fell 0.17%

# The first revision to U.S. Q2 GDP revealed output in the U.S. advanced at 4.2%, faster than the previously thought figure of 4.0%. The stronger growth in real GDP reflected growing personal consumption, private inventory investment, exports, both residential and non-residential fixed investment, as well as local government spending. The gains were partially offset by an increase in imports, which negatively impact GDP, and a 0.9% decline in federal government expenditures. The extraordinary level of growth in Q2 is of course a rebound from the dismal, weather affected contraction of 3.0% in Q1.

# U.S. Weekly Jobless Claims remained steady near multi year lows at 399k.

# After a period of relative calm, tensions between Ukraine and Russia flared up again on Thursday. Ukraine’s leader cancelled a trip to Turkey because “the introduction of Russian forces into Ukraine has taken place,”. A NATO official said Russia’s actions in Ukraine are “more overt now.” The U.S  State Department weighed in saying it’s seeing a ‘pattern of escalating aggression’ by Russia in Ukraine. There was no immediate response from Moscow.

# Inflation readings from Spain and Belgium were lacklustre, with the former slipping deeper into deflation and the latter seeing consumer-price growth plunging to its lowest level in almost five years. In (the previously?) powerhouse Germany, consumer-price growth stabilized at a low rate this month (+0.8%). The reports came ahead of the closely watched euro-zone inflation data due on Friday, which could be a key factor in whether the European Central Bank decides to embark on more easing.

# Confidence surveys for the euro zone added to the pressure on the ECB to take more action. The European Commission’s sentiment indicator, a broad measure of business and consumer confidence in the currency bloc, weakened to 100.6 in August, from 102.1 a month earlier.

# European bond yields continued to push to record lows on the toxic mix of poor sentiment and super low inflation (deflation). Yields on the 10-year German Bund touched a new historic low of 0.86%. The U.S 10 year drifted lower too, now yielding 2.33%, only a touch above the years low of 2.30%.

# Iron ore declined to the lowest level in 5years on concern that the economic slowdown in China, the world’s biggest consumer, will curb demand for the steelmaking ingredient as the global surplus expands. Ore with 62% content dropped 0.7% to $87.70 a dry ton today, the lowest since October 2009. The raw material fell for a ninth day in the worst run since September 2013 and is down 35% on the year.

Cheers G.

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