Market wrap
Risk currencies slightly firmer. It was a lack-lustre evening for equities, the S&P500 currently up 0.1% and extending a consolidation pattern into its fourth day. There was little newsfl ow of market importance, save perhaps for a meeting between Merkel and Sarkozy. That produced some rhetoric but little else, Merkel stressing again that “no country must leave the Euro”, in contrast to the stance of her coalition partner. Commodities were mixed, the CRB index up 0.6%% but oil down 1.0% and copper down 0.6%. US 10yr treasury yields are 2bp lower at 1.94%, having touched 1.92% around midday NY. Greek government bonds were the focal point in Europe, talk of forced restructuring involving larger write-off s for bondholders pushing the 10yr yield up 73bp..
The US dollar index fell about 0.6% between the NZ close and midday London, thanks largely to the EUR which rose from 1.2705 to 1.2786. The NY session saw those EUR gains partly reversed to 1.2745 currently. AUD underperformed the majors following a weaker retail spending report which raised the probability of further RBA easing, initially rising with the EUR from 1.0170 to 1.0245 and currently at 1.0215. NZD rose from 0.7805 to 0.7865. AUD/NZD broke lower following the retail spending report and dribbled another 40 pips lower to 1.3000 currently.
Economic wrap
No US data reported.
Canadian quarterly surveys disappoint. The Bank of Canada's senior loan officer survey found tighter credit availability for the second quarter running in Q4, with the net balance of responses moving from –27% to –6%. The Q4 business outlook survey showed future sales falling from 6 to –4, the weakest outcome since early 2009. Also building permits fell 3.6% in Nov, with residential up 6.9% but non-res down 17.6%.
Euroland Sentix investor confidence rose from –24.0 to –21.1 in Jan, only the second rise in ten months but still leaving the index where it was when the European economy last entered recession in 2008. Other data included at 2.5% rise in German exports in Nov, but a 0.6% fall in industrial production in the same month.
Following their meeting today, Chancellor Merkel and President Sarkozy announced that agreement on the new budget rules including the balanced budget requirement to be enshrined in euro member constitutions, should be reached by January and signed by March (representing something of a fast-track). The capitalisation of the permanent bailout fund (ESM) would be accelerated (but not increased, at least yet). They also announced a push to revive economic growth, without specifying how (and it will be difficult with budget austerity measures being imposed), although they have asked the EU Commission to find new measures to create jobs and improve the mobility of labour. They also urged that the Greek debt restructure be finalised quickly. A financial services tax remains on the agenda, despite the UK's veto last December.
Market outlook
AUD/USD and NZD/USD outlook next 24 hours: Building approval data for both Australia and NZ will be watched today, as will China's Dec trade balance. US equities may be infl uenced by the unofficial start to the Q4 US company earnings announcements, Alcoa reporting after the NY close. AUD should be bounded by 1.0300 above and 1.0100 below today, NZD by 0.7900 and 0.7760Forex Exchange Morning Report
Market wrap
Risk currencies slightly firmer. It was a lack-lustre evening for equities, the S&P500 currently up 0.1% and extending a consolidation pattern into its fourth day. There was little newsfl ow of market importance, save perhaps for a meeting between Merkel and Sarkozy. That produced some rhetoric but little else, Merkel stressing again that “no country must leave the Euro”, in contrast to the stance of her coalition partner. Commodities were mixed, the CRB index up 0.6%% but oil down 1.0% and copper down 0.6%. US 10yr treasury yields are 2bp lower at 1.94%, having touched 1.92% around midday NY. Greek government bonds were the focal point in Europe, talk of forced restructuring involving larger write-off s for bondholders pushing the 10yr yield up 73bp..
The US dollar index fell about 0.6% between the NZ close and midday London, thanks largely to the EUR which rose from 1.2705 to 1.2786. The NY session saw those EUR gains partly reversed to 1.2745 currently. AUD underperformed the majors following a weaker retail spending report which raised the probability of further RBA easing, initially rising with the EUR from 1.0170 to 1.0245 and currently at 1.0215. NZD rose from 0.7805 to 0.7865. AUD/NZD broke lower following the retail spending report and dribbled another 40 pips lower to 1.3000 currently.
Economic wrap
No US data reported.
Canadian quarterly surveys disappoint. The Bank of Canada's senior loan officer survey found tighter credit availability for the second quarter running in Q4, with the net balance of responses moving from –27% to –6%. The Q4 business outlook survey showed future sales falling from 6 to –4, the weakest outcome since early 2009. Also building permits fell 3.6% in Nov, with residential up 6.9% but non-res down 17.6%.
Euroland Sentix investor confidence rose from –24.0 to –21.1 in Jan, only the second rise in ten months but still leaving the index where it was when the European economy last entered recession in 2008. Other data included at 2.5% rise in German exports in Nov, but a 0.6% fall in industrial production in the same month.
Following their meeting today, Chancellor Merkel and President Sarkozy announced that agreement on the new budget rules including the balanced budget requirement to be enshrined in euro member constitutions, should be reached by January and signed by March (representing something of a fast-track). The capitalisation of the permanent bailout fund (ESM) would be accelerated (but not increased, at least yet). They also announced a push to revive economic growth, without specifying how (and it will be difficult with budget austerity measures being imposed), although they have asked the EU Commission to find new measures to create jobs and improve the mobility of labour. They also urged that the Greek debt restructure be finalised quickly. A financial services tax remains on the agenda, despite the UK's veto last December.
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