29 September 2014
The week ahead (high impact only)
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# RBNZ FX Transaction Data
# European stocks recovered from an early sell off to edge higher, the EuroStoxx600 ending up 0.25% on the day but still down 1.78% for the week. The modest move off one month lows built on positive banking sector recommendations where European banks are seen as beneficiaries of further ECB stimulus. Meanwhile the Dow recorded its 5th consecutive session (and 7th in 9) of moves in excess of 100 points. Trading was dominated by quarter end flows and the placing of strategies for the 4th quarter. By the end of trade U.S. bourses had taken back a large chunk of Thursdays hefty falls, the big board S&P500 up 0.86% on the day for a weekly fall of 1.37%.
# The final reading on U.S Q2 GDP came in on market expectations at a whopping 4.6% rate from the earlier 4.2% measure. The huge jump in Q2 was of course laden with payback from the weather affected Q1 print of -2.9%. The net effect is growth for the first half just south of 1%, and with analyst expectations centring on 3% growth for the rest of the year, that would give a largely unremarkable 2% for 2014. The inflation metric within the data, the GDP deflator, came in around the Fed’s 2% target level at 2.1%.
# The University of Michigan Consumer Sentiment survey showed confidence amongst U.S. consumers jumped to a 14 month high. The headline figure rose to 84.6 from 82.5 in August built largely on U.S. employment growth which is racing along at the strongest pace in 15 years. Lower gasoline prices no doubt added to the upbeat mood.
# Legendary bond investor Bill Gross, widely was viewed as one of the most influential bond investors of all time, announced that he was leaving the $2 trillion bond powerhouse PIMCO, the firm he founded in 1971. The move follows a year of heavy outflows from his flagship bond fund and a fight with his former chief executive and heir apparent Mohammed El-Erain who left 8 months ago. Investors sold Treasury bonds on the news , the yield on the 10-year benchmark Treasury note was hovering at around 2.506% immediately before the disclosure and within a half-hour of the statement, had jumped to 2.546%. In an interesting footnote, earlier in the week the WSJ reported that the Securities and Exchange Commission is investigating the $3.6 billion Pimco Total Return ETF for artificially boosting returns.
# The FX market rounded out the week with a fresh round of USD buying. The moves were fairly uniform with the AUD slightly outperforming as a number of AUD/NZD buy recommendations hit the market. None the less the AUD slid to a fresh 7 month low whilst the NZD hit its lowest level in more than a year.
# Commodities were mixed on Friday. Copper fell 0.26%, IronOre closed flat at 78.60, WTI Crude gained 1.09% and Gold eased $3 to $1,219 due to the strong USD and higher US yields. For the week Gold edged up 0.25%, Copper fell 1.92%, Crude gained 1.22% and IronOre suffered a weekly loss of 3.79% and is now down close to 20% since mid-July and 41.40% for the year.
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