Market wrap
Another small rally in equities. The S&P500 continued its run of small daily gains, up 0.5% as we write. The news flow was net positive, but not dramatically so. French and Spanish bond auctions for 7yr and 10yr maturities went well, and Austria saw good demand at its 50yr auction. Q4 US earnings reports from Bank of America and Morgan Stanley helped those shares outperform, and US jobless claims data was encouraging (although other releases were mixed). The CRB commodities index is 0.3% higher, oil -0.3%, copper +1.3% and gold -0.4%. US 10yr treasury yields are 9bp higher at 1.99%, fi nally reacting to the week's positive sentiment. Eurozone peripherals were well behaved, apart from the Greek 2yr note's yield which rose 1917bp to a record high of 189.88% amid opaque negotiations with bondholders.
The US dollar index is around 0.4% weaker and is breaking below the upward channel which started on 9 November. EUR has broken above its descending channel, rising from 1.2840 to 1.2941 in London and NY. Safe-haven yen underperformed, USD/JPY rising from 76.70 to 77.32. AUD and NZD also underperformed, thanks to weak inflation and jobs reports, respectively, yesterday. AUD found an overnight low at the London open at 1.0371 and rose to 1.0434 but reversed in NY to 1.0395. NZD consolidated in a narrow 0.8002 to 0.8029 range. AUD/NZD fi rmed from 1.2940 to 1.3010 in London but slipped in NY to 1.2960
Economic wrap
US consumer prices flat in Dec for the second month running. Food prices rose 0.2%, energy was down 1.3% and the core rate was 0.145% before rounding to 0.1%, with clothing and car price falls off set by a 0.2% rise in the high weighted rent component. The headline annual rate fell to 3.0% yr but the core annual pace was steady at 2.2% yr.
US housing starts fell 4.1% in Dec entirely due to a 20% fall in multiples, reversing the Nov gain. Single family starts rose 4.4%, their third straight gain. Permits were down 0.1%, also due to multiples with single family permits also up for three months running (1.8% in Dec). More evidence the housing market is bottoming out.
US initial jobless claims fell 50k to 352k in the week ended 14/1, after a 27k rise in the fi rst week of Jan, with the Labor Dept noting seasonal adjustment issues around the new year as a factor behind recent volatility. There still seems to be a downtrend apparent suggesting fewer layoff s since late 2011.
US Philadelphia Fed index rose from 6.8 to 7.3 in Jan (annual revisions applied this month) but the detail showed shipments and orders both down 3-4 pts to 5.7 and 6.9 respectively, while jobs were steady at 11.6.
Canadian manufacturing sales up 2.0% in Nov, their fourth rise in fi ve months, driven by machinery, energy and autos.
Euroland current account defi cit €1.8bn in Nov, down from €6.6bn in Oct, UK consumer confi dence down 2 pts to 38 in Dec according to Nationwide, the second lowest on record after Oct's 36.
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