Overnight Points of Interest
2012 August 5 by Graham
Overnight
# Global equity markets roared higher on Friday rounding out a fascinating week. Sharp falls in Spanish and Italian borrowing costs lit the initial fire whilst a mixed U.S. jobs reports kept the sentiment fanned. The EuroStoxx600 rose 2.43% (Spain’s Ibex up a whopping 6.0%) and the S&P500 rose 1.9%.
# Spanish bond yields plunged after the Spanish PM suggested Spain may soon apply for aid from the EFSF. It was the front end of the interest rate curve that fell most, the 2-year Spanish yield crashed off to 3.73% from 4.53% late Thursday (it was around 7.0% a little over a week ago!) and likewise the Italian 2-year yield collapsed to 3.27% from 3.78% late Friday.
# The EUR/USD surged notching up impressive gains against all comers. From a recent low of 1.2040 the EUR is now pushing against the 1.2400 barrier. From a recent high of 0.6680 the NZD/EUR has been forced back to 0.6605 on the EUR strength.
# Commodity markets staged a strong relief rally – with NY copper gaining 2.34% while NYMEX Crude gained close to 5.0%. Gold climbed back above 1,600 to close at 1,603 – up from 1,590 late Thursday.
# The U.S Non-Farm Payrolls report generated a fair amount of enthusiasm although the details were not exactly scintillating. Indeed the good vibes may be based on the ‘Goldilocks’ notion of ‘not too hot and not too cold’. That is, whilst the headline number was better than forecast at 163k v 100k , the unemployment rate worsened from 8.2% to 8.3% and the prior months results were revised for the worst. This keeps the market happy in the near term but also keeps a FED easing in the picture as well.
# A poll of 16 US primary dealers (banks the deal directly with the FED) taken after payrolls shows 63% chance of more QE and if the Fed were to act, then 13 dealers say it could happen at Sept meeting.
# Presidential candidate Romney told CNN that the Fed shouldn’t use new stimulus measures
# The UK Telegraph reported that the BOE is poised to sharply downgrade growth and inflation forecasts. It is expected to slash 2012 growth forecast from plus 0.7% to close to zero and growth forecast for 2013 expected to be cut to 1.5% from 2.0% in May statement
The week ahead (major releases in bold)
# : 6 August: AU NSW bank holiday; 7 August: NZ QES & LCI labour market surveys; AU RBA meeting; UK IP; UK manufacturing; EU German factory orders; 8 August: NZ QV house prices; AU loan approvals; JN trade balance; UK BoE inflation report; EU German IP; 9 August: NZ HLFS employment; NZ consumer confidence; AU employment; CH CPI, retail sales, IP, and investment; JN BoJ meeting; US trade balance; US jobless claims; 10 August: NZ card spending; AU RBA Monetary Policy Statement; CH trade balance; JN IP; EU German CPI; UK PPIs;
Today
# FED Chairman Bernanke speaks.
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Overnight Points of Interest
2012 July 26 by Graham
Overnight
# ECB President lit a fuse under global stock markets sending European bourses rocketing higher. The Spanish Ibex exchange led the way with an incredible 6.0% jump (Italy +5.62%) propelling the broad EuroStoxx600 to a 2.47% rise. The U.S. exchanges followed suit with the S&P500 up a solid 1.65%.
# ECB President Draghi, frustrated by the risk premiums the market has imposed on the likes of Spain and Italy, came out with some fighting words. Commenting that the super high yields were hampering the proper functioning of policy Draghi said “ the ECB will do whatever it takes to preserve the euro”, adding, “believe me, it will be enough”.
# Yields on benchmark 10 year bonds in Spain and Italy sharply reversed course, Spanish yields dropping whopping 0.45% to 6.93% and Italian yields a similar 0.39% to 6.06%.
# The slightly less dovish than expected RBNZ statement yesterday meant the NZD performed particularly well in the ‘risk on’ environment that was last night. The NZD/USD jumped 2.2% to a high of 0.8030 in the process outperforming the AUD to see the cross up from 0.7650 to 0.7710. The RBNZ noted that while obvious global risks were present, underlying inflation was, ”expected to settle near the mid-point of the target range over the medium term” strongly suggesting that there was no likelihood of the rate cuts that the market had partially priced in.
# A great result in the weekly U.S. jobless claims, with benefits requests falling sharply. US Weekly Jobless Claims dropped to 353k against f/c 380k previously revised up 2k to 388k.
# Further, U.S Durable Goods Orders kept the better tone intact, rising 1.6% for June against expectations of a 0.4% forecast.
# However the U.S. housing sector, which had been a bright spot in recent months, failed to run with the crowd falling 1.4% m/m when a 0.2% rise was expected.
# Commodities generally under performed with the CRB Index rising a miserly 0.23%.
# In a blow to NZ exporters, the Economist magazine issued an update on their ‘Big Mac Index’ which looks to explain exchange rate values through the price of the ubiquitous McDonalds Big Mac burger. In New Zealand, a Big Mac costs US$4.00 and the Kiwi is now around 10% undervalued compared to around 8% undervalued in 2007 they suggested. Conversely in Australia, a Big Mac costs US$4.68 and The Economists noted the Australian dollar is now overvalued by 8% compared to being undervalued by 14% in 2007. These comparisons could make buying the NZDAUD, after the promise it showed overnight, a good idea!
Ahead
# U.S. Q2 GDP
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Overnight Points of Interest
2012 July 22 by Graham
Overnight
# A worsening of the Spanish situation drove markets Friday. Spain’s Ibex exchange fell a whopping 5.82% pulling the EuroStox600 down 1.41% and the S&P500 down 1.01%.
# Fears that Spain would join Greece, Ireland and Portugal in needing a bailout intensified after the Valencia Region of Spain said it would apply to Madrid for financial help. Adding to the pressure on Spanish bonds is ambiguity on when and how the EFSF/EMS will deal with the issue of capitalizing Spanish banks and who is ultimately liable if losses are incurred.
# Over the weekend new reports from Spanish newspaper El Pais suggested another six regions (including Catalonia) will soon do the same.
# Further undermining sentiment, the Rheinische Post carried a report saying that the CSU, one of Merkel’s opposition partners, would back a Greek euro-exit.
# The ECB advised that Greek bonds ineligible as collateral from July 25.
# Spanish 10 year bond yields rose to new Euro era highs of 7.31% whilst the spread over Germany blew out to over 600 points for the first time ever. Italian yields moved in sympathy, the 10 year yield there moving from 5.99% to 6.31%.
# Surprising no one, the EUR/USD slipped to fresh 2 year lows below 1.2150 whilst many other currencies hit new life-time highs against the beleaguered common currency.
# Key commodities sold off in response to the Spain-led spike in risk aversion with NY Copper falling over 2.5% on the day – the biggest daily fall in a month. Crude retreated from its recent strong run falling 1.3% whilst Gold was stable, underpinned by expectations that the intensifying Eurozone debt crisis will inevitably force the ECB to engage in some form of QE.
# A Wall Street Journal article on Friday suggested that some members of the BOJ (including the governor) feel the strong JPY is helping economic growth. This story is a complete 180 degree turn on the long held belief that Japanese authorities want a weaker JPY and could have a significant impact if confirmed.
The week ahead
# 23 July: AU PPIs; US Chicago Fed index; 24 July: CH HSBC manufacturing PMI; AU RBA’s Stevens speaks; EU manufacturing/services PMIs; US Richmond Fed index; US house prices; 25 July: NZ trade balance; AU CPI; EU German IFO; UK Q2 GDP; US new home sales; 26 July: NZ RBNZ OCR review; NZ finance minister speaking; US durable goods orders; US jobless claims; US pending home sales; 27 July: EU German CPI; US Q2 GDP; US Michigan consumer confidence
Today
# Australian Producer Price Index
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Overnight Points of Interest
2012 June 18 by Graham
Overnight
# Asia’s upbeat mood following the Greek election result was not sustained in offshore markets overnight. The EuroStoxx600 ended essentially flat (-0.05%) whilst the S&P500 was up marginally by 0.1%.
# Soaring Spanish borrowing costs spooked the market. Spain’s benchmark 10 year bond yields raced through the level that necessitated bailouts in Greece and Portugal rising as much as 41 points at one stage to a record high of 7.29%. Driving the move was news that bad loans as a proportion of total Spanish lending jumped to 8.72 % in April, the highest since 1994, from 8.37 % in March.
# Whispers then abounded that Spanish banks may need a further EUR150 bln bailout on top of the EUR100 bln of only a week ago.
# The Spanish IBEX closed down 2.95% after opening 2% higher.
# The EUR/USD fell dramatically, surrendering Asia’s gains and more, shedding almost 2 cents (key reversal day on my charts) from 1.2750 to 1.2550.
# The NZD and AUD remained at familiar levels as strong EUR/Cross activity was seen.
# U.S. homebuilder confidence rose to a five-year high of 29 (better, but below 50 means conditions are still termed ‘poor’).
Ahead
# G-20 meetings continue
# Australian RBA Monetary Policy minutes from the June 5th meeting
# U.K. Inflation
# ZEW German Economic Sentiment
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Overnight Points of Interest
2012 June 11 by Graham
Overnight
# Monday mornings’ enthusiasm regarding the Spanish bank bailout proved fleeting indeed. Asia had U.S. equity market futures up well over 1% during our morning however concerns soon resurfaced over the robustness of the plans resulting in the EuroStoxx600 ending the session flat whilst the S&P500 fell 1.25%. The Spanish Ibex exchange initially opened up over 5% but ended up closely in negative territory!
# With the market coming to understand that the 100 bln bail-out debt would be tied to the Spanish sovereign, Spanish 10 year bond yields soared to new heights at 6.51% .Further compounding the gloom, contagion fears were clearly evident with Italian 10 year bonds breaching the 6.00% level.
# Ratings agency Fitch downgraded Santander (the largest bank in the Eurozone) and Banco Bilbao to BBB+ saying the rating actions reflected last week’s downgrade of Spain and the expectation that the country will remain in recession through 2013. Both institutions were downgraded to triple-B-plus from A, placing them three levels above junk territory. The outlook on both banks is negative.
# Reports again surfaced that European officials were reported as making contingency plans for Grexit.
# Portugal bank ECB borrowing hits record EUR58.7bln in May.
Ahead
# NZ Electronic Card transactions
# REINZ House Prices
# NAB Australian Business Confidence
# UK Manufacturing Production
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