5 November 2014
# NZ Employment Change and Unemployment Rate
# NZ labour Costs Index
# BOJ Gov. Kuroda speaks
# U.S. ADP Non-farm Employment Change
# U.S. ISM Non-manufacturing PMI
# European stocks dived for a 2nd day as the European Commission delivered a bleak assessment of the economic outlook for the Eurozone. The commission duly reminded the market that stagnation and deflation remain the key challenges, which sent the Stoxx600 down 1.01%. Meanwhile U.S. stocks initially declined before a rebound saw the main bourses mixed heading into the close. With half an hour to go the Dow is up 0.10% and the S&P500 down 0.30%.
# The European Union slashed its economic forecasts for the Eurozone, lowering its 2014 growth forecast for the 18-country Eurozone to just 0.8% from the previous 1.2%, with 2015 chopped to 1.1%from 1.7%. Growth is seen as picking up to 1.7% in 2016. The EU also warned that France and Italy remain huge problems for the sluggish European economy. In a dire forecast, Brussels said the public deficit in France would surge to 4.5% of total GDP in 2015 and keep widening to 4.7%in 2016, making it the biggest in the Eurozone. These figures are way off the EU's limit of 3.0%. Debt-laden Italy was expected to stay in recession for a 3rd consecutive year with a contraction of 0.4%, followed by 0.6% growth next year. Again these pan-national bodies aren’t telling the market anything they don’t already know, the EUR/USD actually rallying from 1.2485 to 1.2550.
# UK construction activity expanded at the weakest rate in 5 months in October as signs of a housing market slowdown caused a slowdown in the building of new homes. The Markit construction PMI fell to 61.4 in October from 64.2 in September, a steeper decline than the drop to 63.5 forecast. The index has now been above the 50 threshold denoting growth for a year and a half, the longest continuous period since the global financial crisis in 2007/08. But all three broad areas of construction activity posted a smaller rise in output than in September, with house building falling to its lowest rate of growth in 12 months.
# U.S factory orders fell for second straight month in September dropping 0.6% in line with forecasts.
# WTI Crude continues to plunge, this time knocking out new 3 year lows as the weight of increased U.S. supplies and Saudi price cuts continue to weigh. North sea Brent touched a 4 year low. Further fuelling the decline is speculation the largest producers in OPEC are keener on preserving market share rather than propping up prices. U.S. oil output has jumped to the highest in 3 decades, Russia is pumping the most since the fall of the Soviet Union and Libyan production is recovering while oil demand forecasts have been revised down. WTI for December delivery fell $1.97, or 2.5%, to $76.81 a barrel after touching $75.84, the lowest intraday price since Oct. 4, 2011. The volume of all futures traded was 54% above the 100-day average.
# The USD gave back some of its recent gains in what looked like investors pausing to book profits ahead of market-moving events later this week. Certainly the weight of last night’s evidence still overwhelming favours the USD. The USD/JPY gave back some of is extraordinary 2 day gains drifting from 114.20 to 113.20 whist the EUR/USD rose as earlier mentioned. There was large divergences in the commodity block currencies, the NZD/USD rising 0.7% on a stable dairy auction, the AUD/USD steadying after yesterdays mixed data bomb (and RBA announcement) whilst the CAD weakened sharply in line with the very weak crude complex.
# U.S. yields, as measured by the 10 year note, continues to stabilise around 2.33% after the wild events of the last month.