Overnight Points of Interest
2013 May 20 by Graham
Good morning
Overnight
# Equity markets continued the magnificent bull run, this time buoyed by a strong U.S consumer confidence reading. The EuroStoxx600 ended Friday up 0.24% to round out a 1.22% gain for the week. Within the Eurozone the German DAX posted a fresh all-time intraday high, daily and weekly closing highs. Stateside, the S&P500 rose 1.03% to end the week up 2.07%.
# The University of Michigan Consumer Confidence Survey rocketed to a 6-year high of 83.7 versus 77.9 expected as rising real estate values and record stock prices boosted household wealth. The gains appear to show that Americans are overcoming the effects of higher taxes and a package of federal spending cuts, known as sequestration.
# The amazingly robust reading drove U.S. 10 year bond yields back towards the highs of the week, ending up at 1.95% from 1.87% earlier.
# In a unwelcome development for a slowing economy, China April home prices jumped 4.9% on year, the fastest gains since April 2011. 67 out of 70 cities showed new home prices rising. This leaves China authorities face a deepening dilemma in trying to curb property prices while at the same time supporting an economic recovery.
#Best to worst performing currencies last week
CCY May10 May 17 % changes
EUR 1.2992 1.2838 -1.19%
GBP 1.5363 1.5172 -1.24%
JPY 101.58 103.18 -1.58%
CHF 0.9566 0.9723 -1.64%
CAD 1.0100 1.0285 -1.83%
AUD 1.0017 0.9730 -2.87%
NZD 0.8307 0.8060 -2.97%
# The USD strengthened across the board last week breaking key resistance and rising to a 3 year high – but it was a terrible week for the commodity/risk currencies. Commodity prices remained sluggish andChinagrowth concerns resulted in macro-funds targeting the AUD and NZD. Expectations the Fed is softening the ground for scaling back QE efforts broadly supported the USD – while expectations the RBA has further to go in its easing cycle made the AUD particularly vulnerable.
# Friday most commodities moved higher with Copper and U.S. Crude gaining a bit less than 1.0% despite the rise in the US dollar. Both commodities lifted on the much betterUSsentiment data, while Copper was also underpinned by inventory stats indicating greater draw-downs fromChina. The hawkish shift in Fed expectations and stronger USD kept Gold under pressured and the ETF’s kept selling. Gold fell close to 2.0% to close at 1,358 – the lowest weekly close since Feb 2011. IronOrecontinued to tumble closing 2.35% lower at 123.23 from Thursday’s close at 126.19.IronOrehas fallen 23.35% from the Feb 20 high at 160.78. For the week Copper fell 1.04%, Crude ended the week flat. Gold had a terrible week falling 6.15% andIronOredidn’t do much better – putting in a weekly loss of 5.86%.
Ahead
BBY (NZ) Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Overnight Points of Interest
2013 May 9 by Graham
Good morning
I will be on annual leave from tomorrow until Thursday, as such the OPI output will take a break until then.
Overnight
# European stocks were buoyed by the 2nd consecutive day of positive German data surprise, the Eurostoxx600 rising 0.64%. Meanwhile, the S&P500 advanced for the 5th straight day once again setting new all-time highs. The S&P500 rose 0.41%v ending on its intraday high.
# German Industrial Production helped underpin the EUR and European stocks. March IP rose 1.2%m/m, well above the 0.1% decline expected. Coming just a day after the similarly upbeat German factory orders figures, the data has buoyed hopesGermanymay yet avoid recession.
# One of the market trends that has occurred recently, and largely without fanfare, is the decline in borrowing cost for the European ‘periphery’. From 350bps in early April, Italian-German 10-year bond spreads have fallen to almost 250bps. Spanish equivalents have plunged from 375bps to 280bps over the same period. As various commentators have noted, these declines are doing far more to ease European financial conditions than the ECB’s 25bps refi rate cut.
# Legendary investor Stanley Druckenmiller, ex Soros Fund, hit the wires saying the commodity swoon is not just a correction, the party is over due to oversupply and the AUD is going to come down hard. http://au.businessinsider.com/druckenmiller-pessimistic-on-commodities-2013-5
# The U.S. Treasury’s sale of $24 billion in 10-year notes got a lukewarm reception from investors, drawing $2.70 in bids for every $1 worth of notes on sale, below the average.
$2.89 from the past eight auctions, according to CRT Capital Group. As a result, theU.S.government is paying a higher interest rate of 1.810% for the new notes, more than the 1.800% for similar notes already in circulation before the auction.
# Commodities were well bid, Gold futures posted the biggest gain in almost two weeks as demand for bars and jewellery increased in India and China, the world’s largest consumers of the metal. Gold futures for June delivery advanced 1.7 % to settle at $1,473.70 an ounce. U.S. Crude rose to a one-month high after supplies fell at Cushing, Oklahoma, the delivery point for the contract. Brent oil’s premium to WTI shrank below $8 for the first time since January 2011. U.S. Crude for June delivery increased $1 to $96.62. Dr Copper also rose, climbing 2.0% on the back of the strong China trade data yesterday and the German IP data overnight.
Ahead (big day in this neck of the woods)
# NZ Employment Change
# Australian Employment Change
# China CPI
# Japan Leading Indicators
# UK Manufacturing and Industrial Production
Cheers G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Overnight Points of Interest
2013 April 22 by Graham
Good morning
Overnight
# Equity market action Friday appeared to have all the hallmarks of position squaring into the weekend after a week of rather heavy falls. The EuroStoxx600 rose 0.52% to be down 2.46% on the week. The S&P500 rose 0.88% to end the week down 2.1%. The modest gains apparently came on very light volume which is a negative for bulls.
# Ratings agency Fitch cut the UK’s sovereign debt rating to AA+ from AAA, citing a weaker economic and fiscal outlook. But it returned the outlook to “stable”, removing the threat of any further rating action, at least in the near term. This aligns the rating with Moody’s downgrade earlier this year so does not come as a huge surprise.
# The G20 didn’t single out Japan for overseeing a huge fall in the JPY since mid-November when it first became apparent that Abe would be the next Japan PM. If there was criticism of Japan’s policies – the G20 members kept it on the hush-hush. As a result USD/JPY is probing towards 100.00 this morning with the market sensing a ‘green light’ for further JPY weakness. It appears the G20 is less concerned about currency wars and sovereign debt blow-outs and instead want to encourage economic growth initiatives. This is the main reason Japan escaped criticism for at least indirectly pushing the value of the Yen significantly lower.
# Australian Treasurer Swan said the Australian budget has taken a 7.5 BLN AUD “sledgehammer hit” saying the high Australian dollar and falling terms of trade are to blame.
# Italian Parliament elected Napolitano to second term as President with overwhelming majority.
# Best to worst performing currencies last week
CCY Apr5 Apr 12 % change
EUR 1.3111 1.3051 -0.46%
CHF 0.9270 0.9332 -0.67%
GBP 1.5348 1.5230 -0.77%
JPY 98.38 99.50 -1.14%
CAD 1.0137 1.0270 -1.31%
NZD 0.8414 0.8421 -1.91%
AUD 1.0503 1.0275 -2.17%
# Comment – The mood last week was decidedly “risk-off” as equities and commodities sold off in some of the biggest moves since the start of 2013. The USD was the main beneficiary of the move out of risk – as the JPY no longer holds a safe-haven status. Not surprisingly – the “risk/commodity” currencies, the AUD, NZD and CAD were the worst performing.
# Commodities were mixed with gold stabilizing and closing above 1,400 for a 0.95% gain; U.S. Crude rose 0.32% while Copper continued to underperform – falling 1.38% and closing below 7,000 – the first time it had a weekly close below 7,000 in almost three years. Iron Ore fell slightly to 138.43 from Thursday’s close at 138.85. For the week gold fell 5.04%; Brent Crude fell 3.36%; U.S. Crude fell 3.59%; Copper fell 5.82% and Iron Ore fell 2.58%.
# Italian and Spanish bond yields continued to edge lower as yield seeking investors are happy to ignore political and economic negatives for the time being. The 10-year Italian bond yield eased to 4.22% from 4.25% while the 10-year Spanish debt yield closed at 4.63% down from Thursday’s close at 4.66%. Clearly participants here see a much increased chance of a forthcoming rate cut out of the Eurozone.
Ahead
Key data in the week ahead The key US data in the week ahead will be Q1 advanced GDP on Friday, which is expected to come in at a healthy 3.0%. Other US data includes Existing Home Sales; New Home Sales; Durable Goods and Univ of Mich Sentiment Index. Key EZ data includes advances MFG PMI data on Tuesday and German IFO on Wednesday. HSBC Flash China MFG PMI is out on Tuesday and will be a key event in Asia. The BoJ meets again Thursday/Friday and the RBNZ announces on Wednesday.
Cheers G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Overnights Points of Interest
2013 April 8 by Graham
Good morning
Overnight
# The Non-Farm Payrolls data out of the U.S sent stocks sharply lower Friday however by the end of stateside trading U.S. bourses had recovered reasonably strongly. The EuroStoxx600 fell a hefty 1.57% and the S&P500, after being down well over 1.0% closed down only 0.43%.
# The U.S payroll data was a mixed bag but the bones of the data were undeniably weak. A rather anaemic 88,000 new jobs were created against an expectation of near 200k. There were two positive data points: jobs gains for February were revised upward to 268,000 from an initial 236,000, and in January to 149,000 from an initial 119,000. However, the real kicker was the participation rate which fell to a 40-year low of 63.3 % last month, from 63.5 % the month before. The unemployment rate fell to 7.6 % from 7.7 %, but only because 496,000 Americans stopped looking for work. Total unemployment remains at about 3 million fewer jobs than at the pre-recession peak. The worry here is that if all the people that could work, returned to looking for work, the unemployment rate would be massively higher.
# The USD was a very mixed bag in the wake of the numbers, hit hard against GBP and EUR, but improving strongly against JPY whilst against the NZD and AUD it was largely unchanged. The AUD weakness, that I’ve been suspecting to arrive, was evident as NZD/AUD rose strongly over the week from 0.8020 to 0.8120 whilst against the EUR the AUD was smashed over the course of the week from 0.8180 to 0.7960.
# The JPY continued to be a major story with USD/JPY now up an incredible 600 points from Thursdays BOJ ‘shock and awe’ announcement. The JPY weakness promoted NZD/JPY to 5 year highs above 82.50.
# Best to worst performing currencies last week
CCY Mar29 Apr5 %Change
CHF 0.9494 0.9355 1.46%
EUR 1.2819 1.2994 1.37%
GBP 1.5191 1.5340 0.98%
NZD 0.8366 0.8432 0.79%
CAD 1.0173 1.0175 -0.02%
AUD 1.0416 1.0378 -0.36%
JPY 94.28 97.56 -3.48%
# Key commodities continued to perform poorly due to global growth concerns – with copper falling 0.46%. U.S. Crude fell 0.60% while Brent Crude fell 2.09% to 104.12 – its lowest daily close since July 24 last year. Gold managed to claw back almost all of the hefty losses incurred earlier in the week, as the promise of on-going Fed QE and the extremely aggressive BOJ QE brought Gold buyers back into the market. Gold stormed 1.85% higher to close at 1,581. Iron Ore was steady – rising 0.22% to 135.90.
# Peripheral debt yields in the Eurozone continued to calm and move lower, as the Cyprus contagion fears continued to fade and investor faith in the ECB to do what is needed encouraged buying of Italian and Spanish bonds. Analysts also noted that the very cheap money on offer from Japan and the US encouraged riskier bond buying. The 10-year Italian bond yield plunged to 4.38% from 4.56% at Thursday’s close – while the Spanish 10-year bond yield fell to 4.76% from 4.93% at Thursday’s close.
# S&P affirms UK AAA rating, outlook remains negative due to outlook for weaker economic
Ahead
http://www.forexfactory.com/calendar.php
Cheers G
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Overnight Points of Interest
2013 April 5 by Graham
Good Friday morning
Overnight
# European stocks fell on comments from ECB President Draghi however U.S. stocks are making a better fist of things. The EuroStoxx600 ended down 1.05% whilst the S&P500 ended up +0.40%
# The ECB President, after leaving the benchmark borrowing rate at 0.75%, said that the Eurozone was at risk of a deeper recession. Mr. Draghi acknowledged that the recovery in the second half of the year is still at risk of being thrown off course. He also took time to stress the Cyprus bailout should not be seen as a template for future bailouts.
# The BOE opted not to pump new money into Britain’s stagnant economy, despite a remit that gives it clearer leeway to disregard above-target inflation. The central bank said it would not add to the £375bn of government bonds it purchased from March 2009 to October 2012, and would keep interest rates at a record low of 0.5%.
# The big news in central banking was of course the first Bank of Japan meeting under the leadership of new chief Kuroda late yesterday. The new Governor chose the ‘shock and awe’ route, trumping all market expectations as to what the easing program would be going forward. The BoJ intends to raise its monthly bond purchases to ¥7t vs. an estimate of ¥5.2t. It also intends to buy longer-dated bonds with maturity up to 40-years, helping to flatten the curve. It also announced a highly ambitious two year goal for achieving its new 2% inflation target. USD/JPY roared from below 93.00 to nearly 96.50 and sits close to the highs now.
# U.S jobless claims rose as the number of Americans seeking unemployment aid rose to a four-month high last week. Weekly applications increased 28,000 to a seasonally adjusted 385,000. That is the highest level since late November. The four-week average, a less volatile measure, rose to 354,250. This development is all the more worrying in the context of yesterday’s weak ADP report.
# The AUD, despite strong data yesterday, showed distinct weakness on the crosses suggesting the recent losses in base metals may be weighing. Against the EUR the AUD fell from almost a cent from 0.8160 to 0.8070 (see yesterday’s Charts of Interest) whilst the NZD/AUD cross rose from 0.8025 to 0.8070.
# Crude Oil dropped sharply for the 2nd day in a row shedding almost 5% over the period. The weak employment data added to the generally weaker data tone seen lately and suggesting demand may wane whilst supply rises to multi decade highs .
# Gold plumbed new 10 month lows, and like crude, has shed nearly 5% over the last few days. Global holdings of exchange-traded products backed by gold are down 7.4% this year, while the MSCI All- Country World Index of equities advanced 5 %. Simply put the resilience of the financial system, in the face of events like Italy and Cyprus, has reduced the safe haven appeal of gold whilst the strong equities rally simply attracts more capital. Gold stopped just short of the crucial US$1,530/35 area at $1,540 before bouncing to $1,553.00
# U.S 10 Year Treasury yields dropped to the lowest levels of the year at 1.76% in response to the weak jobs data and aggressive easing by the BOJ
Ahead
# BOJ Gov Kuroda Speaks
# Eurozone Retail Sales
# U.S Non-Farm Payrolls
# U.S Consumer Credit
Good weekend all
G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Overnight Points of Interest
2013 March 25 by Graham
Good Monday morning
Overnight
# As offshore trading sessions progressed Friday the market moved ever more confidently towards pricing a positive resolution to the Cyprus drama. The EuroStoxx600 ended down a marginal 0.15% whilst stateside U.S bourses rose solidly, the S&P500 ending up 0.72%. For the week the EuroStoxx fell 1.14% whilst the S&P eased 0.24%.
# Mirroring the stock markets’ positive expectations for a Cyprus solution, two of the key ‘risk’ barometers for the Eurozone, Italian and Spanish bond yields fell. The Italian bond yield fell sharply to 4.51% from 4.64% whilst the 10-year Spanish bond yield eased to 4.86% from 4.89%. Amazingly Italian and Spanish bond yields are lower than they were before the Cyprus crisis started. (Is that confidence or perhaps blind faith that investors have in the ECB and its ability to manage a crisis?).
# U.S Treasury yields closed at 1.92% up slightly from Thursday’s close at 1.91% but well lower than last week’s 1.99% close.
# The German IFO Mar Business Climate fell to 106.7 vs 107.4, the first drop since October.
# GBP showed minimal reaction to news that ratings agency Fitch had placed the UK on ratings watch- negative, saying they are to complete review by end of April.
# The ‘Troika’, demanding more of Cyprus, increased the size of the contribution by Cyprus for the bailout package to EUR6.7 bln from the original EUR5.8 bln. In a reworked attempt at the bailout savings accounts of €100k or less will now be protected but over that benchmark will be subject to a whopping 20% levy.
#Best to worst performing currencies last week
CCY Mar15 Mar22 % change
JPY 95.25 94.53 0.76%
NZD 0.8290 0.8352 0.75%
GBP 1.5123 1.5230 0.71%
CHF 0.9468 0.9406 0.65%
AUD 1.0409 1.0443 0.33%
CAD 1.0205 1.0233 -0.27%
EUR 1.3075 1.2988 -0.67%
# The EUR was the centre of attention last week, as the Cyprus crisis dominated the headlines. It isn’t surprising the EUR ended the week as the worst performing currency, but it is a bit surprising it managed to hold up as well as it did. The JPY edged out the NZD as the best performing currency, as the first speech given by new BOJ chief Kuroda wasn’t as aggressively dovish as the market was expecting. The NZD made solid gains as stronger NZ growth data forced some paring back of long AUD/NZD positions.
# Copper rebounded 1.08%, Crude jumped 1.46% while unwinding of safe-haven strategies weighed on gold which eased to $1,608 from $1,615 at Thursday’s close. Iron Ore gained 0.43% to close at 134.89. For the week Copper fell 1.37%; U.S Crude gained 0.37%, Gold gained 1% and Iron Ore fell 0.29%.
Ahead
Regards G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Analysis of interest – U.S. Equities and the USD
2013 March 22 by Graham
Hi
For 5 years or so (since the implementation of U.S QE programs, which in turn was in response to the GFC) we have been in a ‘risk on/risk off’ environment. You’ll all be very aware of how when equities went up, the NZD and AUD went up (USD down) for so long.
Recently that association has seemed to be breaking down. Increasingly one could feel that what is good for U.S equities is becoming good for the USD.
Thus it was of interest this morning that I saw this research from Morgan Stanley showcasing how the relationship has changed of late.
Click here to view Morgan Stanley news
So this chart shows that currently there is a near 80% correlation between positive U.S equities outcomes and a positive USD outcomes.
Thus can I suggest that because the U.S stock market is clearly in a bull market (low volatility, many indexes breaking to all-time highs) that we are now going to see USD strength (and therefore NZD and AUD weakness)?
Cheers G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Overnight Points of Interest
2013 March 22 by Graham
Good Friday morning
Overnight
# Global bourses were in the red from the get go. European stocks fell victim to lousy Eurozone Manufacturing PMI’s whilst technology stocks led U.S bourses lower. The EuroStoxx600 ended down 0.68% and the S&P500 fell 0.83%.
# Manufacturing activity in the euro zone deteriorated to a three-month low in March, remaining in contraction territory for the 20th consecutive month. The index fell to 46.5 from 47.9 in Feb. The fall marked a quickening rate of contraction of business activity for the second consecutive month and showed the steepest fall in four.
# No surprise then that the EUR was the weakest performing G-10 currency whilst the NZD, in the wake of yesterday’s outstanding Q4 GDP print was the strongest. As a result the NZD/EUR cross roared from 0.6350 to 0.6470, a whopping move for sure. Interestingly the NZD and the AUD completely ignored the softer tone of the stock markets suggesting that the move was indeed all about the EUR cross.
# In a classic “buy the rumour, sell the fact” reaction USD/JPY fell hard after the market heard from new BOJ Gov. Kuroda. Following months of speculation that firstly new PM Abe would take power and then invest like-minded Kuroda as his BOJ head, where the USD/JPY had rallied from 78.00 to 96.00 in that period, it appears there was simply no gas left in the tank (market already heavily long) and profit taking liquidation set in. The USD/JPY fell from above 95.00 to below 94.00.
# Regarding N.Z.’s fine GDP number BNZ note this morning that “There was nothing weird in the Q4 GDP data, rather, growth surprised across a significant number of industries “(15 out of 16).
# U.S manufacturing data in comparison with the Eurozone was at the other end of the scale with solid numbers revealed. The U.S. March Markit PMI rose from 54.3 to 54.9 (54.8 expected) and the Philly Fed index soared from -12.5 to 2.0 (-3.0 expected). Importantly a print above 0 for this index shows a move to expansion. In the detail new orders rose to 0.5 from minus 7.8, while the gauge of the number of employees gained to 2.7 from 0.9.
# Still more good news emanating from U.S. housing with the U.S. Government Home Price Index rising for 12th straight month. The results were however below economists’ expectations. Those surveyed by Dow Jones Newswires had expected a 0.9% monthly increase, but the gain is in line with the pace of increases in the prior three months.
# The number of Americans filing new claims for jobless benefits edged higher last week, but a trend reading dropped to its lowest in five years and pointed to on-going healing in the labour market. Claims for state unemployment benefits rose 2,000 to a seasonally adjusted 336,000, which was less than analysts had expected. The four-week moving average for new claims, a measure of labour market trends, fell 7,500 to 339,750, the lowest level since February 2008.
# Crude oil fell on the weak Eurozone data. Crude oil for May delivery declined 1.2% or $1.05 to settle at $92.45 a barrel. Meanwhile Gold pushed on to the topside with the market looking for haven from the danger that Europe presents. The precious metal rose 0.5% to US$1614.00 an oz. (there has been a lot of press about the end of the Gold bull market in recent weeks and months which interests me from a contrarian perspective i.e. when they’re crying you should be buying).
Ahead
# NZ Visitor Arrivals
# Eurozone IFO Business Climate
# Blackcaps to win the toss and rip out of the guts of the English top order.
Have a good weekend all
Cheers G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Reserve Bank of Australia Deputy Gov Lowe says Critical that Non-mining Investment Strengthen
2013 March 19 by Graham
All
What he is saying is that when the resources investment boom begins to soften (i.e. still investment but at a slower rate than previously in the boom) then that becomes a net drag on Australian GDP. When that occurs the Australian economy will need the ‘old’ part of the economy to lift so that they can stay growing at close to trend (3-3.5%).
Problem is that the ‘old’ part of the economy being manufacturing, tourism, banking and retail are all growing at about the slowest level in 20 years around 1%.
In my opinion it is going to be ridiculously hard to get that trend growth when resource investment peaks. I say likely impossible. That makes me think that the AUD is one of the most vulnerable currencies on the planet.
The AUD has been the beneficiary of haven flows because of the AAA rating, proximity to China, no recession in 21 years and relatively high yields. When you combine those massive inflows that have come in over the last 5 years with what should be a struggle to grow at trend from the end of the year then you have a recipe.
G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Chart of Interest – AUD/EUR (the sleeper trade of 2013?)
2013 March 8 by Graham
Hi all
This is one of my dead set favourite trades.
Since the onset of the GFC the Australian dollar has appreciated against the EUR, almost doubling in value as the market sought refuge from the beleaguered EuroZone and finding haven in the high yield, proxy to China growth, AAA rated Australian dollar. What an incredible run.
AUDEUR – click here to view chart
However late last year things began to change with the Troika providing enough funds, and therefore time, for the EuroZone politicians to make the required fiscal changes i.e. labour market, pension reform etc. Meanwhile the RBA forecast an earlier peak in mining investment and resumed cutting rates.
It is my belief that the NZD and AUD currencies are vulnerable to their own success of the last few years (the cure for a high currency is a high currency – eventually it’ll hurt). I think too that Eurozone data will surprise to the topside in as much as it surely can’t get worse.
Technically the picture looks intriguing. We had the ‘head and shoulders’ break down below the neckline and then, as so often happens the retest. Now we look likely to resume the move that should head towards 0.7000
AUDEUR a closer look – click here to view chart
Cheers G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities