Market wrap
Commodity currencies and US treasury yields advanced but equities and commodities were capped during London and NY sessions which were largely devoid of significant news. Greece's Proto Thema reported that the country and banks holding its debt had reached an agreement involving a debt swap into 30 year bonds with an initial coupon of 3.10% rising to possibly 4.75%. That, plus a WSJ article by Hilsenrath suggesting there is little chance the Fed will raise the prospect of further QE at this week's meeting , helped the US 10yr yield rise from 1.96% to 2.03%, still inside the 1.80%-2.04% range since mid-December. US equities were hurt by a sub-consensus earnings result from Google, despite positive surprises from IBM, Microsoft and Intel, but staged a late rally to finish up just 0.1%. The CRB commodities index closed 0.7% lower, copper -1.5%, oil -2.2% but gold +0.5% and silver +5.1%. Eurozone 10yr bond yields were mixed, France and Italy down 5bp and 12bp but Greece and Spain 24bp and 26bp higher.
The US dollar index changed little on the day. Under-performing most, EUR fell from 1.2986 to 1.2887 in London but closed in NY higher at 1.2931. USD/JPY fell from 77.30 to 76.92, closing at 77.04. Speculative futures positioning as at the previous Tuesday was reportedly made a fresh record low. AUD outperformed, rising from 1.0383 in London to 1.0489 (last seen in 1 November) in NY. NZD also fared well, rising from 0.7995 to 0.8064. AUD/NZD rose from 1.2960 to 1.3000
Economic wrap
US existing home sales up 5% in December. The annualised sales pace of 4.61mn was the second highest of the last year, after January, but only slightly ahead of the 4.43mn sales pace recorded in Q3 2009, the first quarter of the economic recovery.
Canadian CPI fell 0.6% in December. Much softer than expected, taking annual infl ation down from 2.9% to 2.3%. A sharp drop in energy prices was a prominent factor, but the downward pressure on prices was widespread - the core measure fell 0.5% for the month and slowed to 1.9% on an annual basis, just below the midpoint of the Bank of Canada's target range.
German producer prices fell for similar reasons. The index fell 0.4% in December, and annual infl ation slowed to 4.0% from a peak of 6.4% in April last year.
UK retail sales rose 0.6% in December on both the total and core measures. Spending was up 2.6% on a year earlier - aside from a brief spike last January, this was the quickest pace since the recession began.
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