Saxo Capital Markets Chronicle

2012-01-31T08:32:00.001+08:00

Daily Trading Stance - Asia Jan 31 (Click link to view)

 EUR under pressure overnight as market still waits for Greek swap deal announcement. EU summit made progress on fiscal compact and budget conditions (25 out of 27 members signed – Britain and Czech Republic abstain). Italy bond auction weak
 AUD also softer as Fitch placed 4 major Australian banks on review for possible downgrade
 US data mixed – Dallas Fed activity v strong, personal income firmer but spending weaker
 Japan jobless rate a touch higher, industrial production firmer in December

Greece, Portugal concerns push the EUR lower overnight

2012-01-31T07:59:00.000+08:00

The EUR sagged overnight as Greek debt swap negotiations continued while Portugal became the next focus of attention with bond yields rising and CDS prices widening which dragged those of Ital and Spain along with them. It is evident will not be out of the woods just by resolving the Greek situation. The Italian bond auction saw a lower participation and fell just short of the €8 bln target adding more pressure on the EUR. There were few astounding developments from the EU summit though the fiscal compact deal saw further progress with 25 out of 27 EU states signing up (Britain and Czech Republic not taking part). AUD tracked the EUR lower as Fitch placed 4 Australian banks on review for a possible downgrade.

On the data front, US personal income came in stronger than expected with a +0.5% print versus 0.4% expected and 0.1% last time but spending slid back to flat from +0.1% (unchanged expected) suggesting the US consumer is still not that confident about the economy and more willing to save for a rainy day. The Fed’s favourite measure of inflation edged marginally higher in December with the PCE deflator up 2.4% y/y (2.3% expected while core readings were up 0.2% m/m and 1.8% y/y. The Dallas Fed manufacturing activity index showed an astounding surge to 15.3 from a revised -0.3 the previous month with new orders up at a 6 month high – merely inventory rebuild?

Earlier we saw Japan’s jobless rate for December which rose to 4.6% from 4.5% with the job/applicant ratio rising to 0.71 from 0.69. Industrial production was better than expected at +4.0% m/m, -4.1% y/y with overall household spending also firmer at +0.5% y/y from -3.2% in November. Still to come we have UK consumer confidence, Australia’s NAB business conditions/confidence and Australia’s private sector credit.

Heading into Europe we can expect German unemployment, Swiss consumption, Norway’s retail sales and UK consumer credit, money supply and mortgage approvals. North America features Canada’s industrial product and raw material prices and GDP. From the US we can see S&P CaseShiller House prices, Chicago PMI, consumer confidence and NAPM-Milwaukee.

2012-01-30T08:14:00.000+08:00

Daily Trading Stance - Asia Jan 30 (Click link to view)

 EUR holding its bid tone on hopes for an imminent Greek debt swap deal, short squeeze for EUR shorts continuing.
 US Q4 GDP data mildly disappointing vs. forecasts, but still vast improvement from Q3
 Slow start to the week data-wise – very little in Asia, US personal income/spending and German CPI the highlights elsewhere.

2012-01-20T08:23:00.001+08:00

Daily Trading Stance - Asia Jan 20 (Click link to view)

 EUR and risk pushed higher overnight following strong French and Spanish auctions, anticipation that a Greek PSI deal is nearer and strong US jobs data
 Weekly US jobless claims at lowest in almost 4 years (but last week’s revised marginally higher)
 Last trading day before the long lunar new year weekend for most of Asia so there is a risk of a quiet session
 The next edition of the DTS will be on Mon January 30 – Gong Xi Fa Cai

EUR extends gains as market anticipates a Greek deal is nearer

2012-01-20T07:40:00.000+08:00

The prospect that a deal on Greek PSI is getting closer, strong auctions by France and Spain (courtesy of ECB liquidity provision, no doubt) and strong jobless claims data out of the US all combined to give risk another leg up and saw the EUR breaking through the 1.29 level versus the dollar. One has to wonder at what level a EURUSD would trigger weak EUR shorts (still at record levels) to bail out – above 1.30?. Spain sold well over its target (EUR 6.6 billion vs. target of EUR 4.5 billion) in maturities from 4- to 10 years while France sold just short of its target, but unloaded a total of nearly EUR 8 billion. The markets barely glanced at leaked drafts of the new EU treaty (which showed a combined EFSF/ESM fund with a minimum of €500 bln firepower) and more comments from ECB’s Weidmann about his opposition to further ECB bond buying together with warnings from Fitch that revisions of six Euro-zone countries are likely failed to dampen the positive risk sentiment.

On the US data front, weekly jobless claims reversed al last week’s slide with the best number in almost 4 years, 352k from a revised 402k last week, while continuing claims also slid to a 3-1/2 year low. The January Philly Fed index came in below forecast at 7.3 but a hefty 3.5 point downward to December’s data left some with a bitter taste. Elsewhere the weekly Bloomberg consumer comfort index deteriorated to -47.4 from -44.7 and January’s economic expectations slipped to -19 from -17. Nevertheless, Wall St extended its rally to a third day with the DJIA rising 0.36%, S&P +0.49% and the Nasdaq +0.67%.

The last day of trading before the long lunar new year weekend for most of Asia so there is a risk we have a lackluster session, but no doubt risk dips will still be keenly bought. On the data front we have Australia’s import/export prices, China’s flash business sentiment survey and the release of HSBC’s flash estimate of January’s manufacturing PMI for China with Japan’s all industry activity and leading/coincident indices to conclude the session. Europe has only German producer prices and UK retail sales on the agenda while the North American session features Canada’s CPI and wholesale sales along with US existing home sales.

2012-01-19T08:19:00.001+08:00

Daily Trading Stance - Asia Jan 19 (Click link to view)

 EUR and risk saw some two-way action overnight but eventually bulls won. Negative factors included a 2-notch Italy downgrade by Fitch but news that the IMF was looking to boost it lending power by $500 bln took the limelight
 US data mixed – industrial production below consensus but the NAHB housing index had its best survey since June 2007, further indication that the US housing market may be bottoming out.
 Today’s main event for Asia will be the Oz employment report for December
 US session sees CPI, housing starts, weekly jobless claims, consumer comfort and economic expectations along with the Philly Fed survey

EUR firmer as IMF looks to boost lending power

2012-01-19T07:44:00.000+08:00

A mixed session for risk and the associated currencies overnight, with the bulls eventually winning. EUR slid initially as Fitch announced a two notch Italian downgrade but the dip was brief and news that the IMF was hoping to boost its lending power by $500 bln saw a faster move through 1.28 versus the dollar. The rally halted briefly after USA and Canada announced that they had no more plans for more IMF funding. Nevertheless, momentum and better US data helped the risk-on trade and the NY session closed at the highs. GBP was able to shrug off an unchanged UK unemployment rate, though still at 17-year highs, as the claims change only posted a 1.2k increase.

On the US front, producer prices were lower in December (-0.1% m/m from +0.3% last) but core levels were higher (up 0.3% m/m from +0.1%). Industrial production was a mild disappointment at +0.4% versus +0.5% consensus with capacity utilization bang in line with forecasts at 78.1%. The good news came from the NAHB housing market index which rose to 25 from 21 (22 expected) and was the best survey since June 2007 giving further evidence that the US housing market may be bottoming out. Wall St pushed higher on the back of the data with the S&P scaling, and closing above, the 1,300 handle for the first time since July 28 last year.

Today’s Asian session is dominated by the Australian employment report for December with expectations of 10k jobs added during the month and an unchanged unemployment rate of 5.3%. Other data releases include confidence indicators from both New Zealand and the UK and the Conference Board’s China leading index for November. It is a relatively barren data slate in Europe with Euro-zone current account data the only item scheduled but things pick up in the US session with CPI, housing starts/building permits, weekly jobless claims and Bloomberg consumer comfort and economic expectations indices. January’s Philly Fed index completes the picture.

2012-01-18T08:24:00.000+08:00

Daily Trading Stance - Asia Jan 18 (Click link to view)

 The EUR rally faded in the second half of the overnight session, despite strong data from Germany and Euro-zone adding to the better China GDP numbers
 US data also firm with empire manufacturing rising strongly, with healthy gains across all key components
 S&P attempted above 1,300 but failed to hold on to gains

EUR rally fails to gather momentum despite strong EU data

2012-01-18T07:44:00.000+08:00

With Asia leaving yesterday and the EUR and risk generally on an upward path following the China data, the trend extended after both German and Euro-zone ZEW surveys showed surprising strength. The current situation index for Germany rose to 28.4 from 26.8 with the economic sentiment index posting a more vigorous rebound to -21.6 from -53.8. From the Euro-zone, the economic sentiment index rose to -32.5 from -54.1. However, the rally soon looked tired and ran out of steam just above the 1.28 mark versus the greenback and we reverted back to Asia’s closing levels. Elsewhere, UK CPI data was bang in line with expectations and lower than last month on an annualized basis with fall sled by fuel and clothing.

US data was again better than expected with the empire manufacturing index jumping to 13.48 from a revised 8.19 and above a consensus forecast of 11.0. In the breakdown, now orders index rose to +13.7 from +6.0, employment index rose to +12.1 from +2.3 and shipments up to +21.7 from +20.1. Wall St was encouraged by the better data from both sides of the Atlantic and posted modest gains though the S&P failed to cling on to the 1,300 handle and a late sell-off saw the close at 1,293.

After yesterday’s excitement, the Asian data calendar is less busy with Australia vehicle sales, China property prices and Japanese industrial production/capacity utilization the only data on tap. UK unemployment data will be the highlight for Europe followed by Euro-zone construction output and the Swiss ZEW survey. The US session features US PPI, monthly TIC flows, industrial production/capacity utilization and the NAHB housing market index. The Bank of Canada also releases its monetary policy report following an unchanged verdict on rates yesterday. Today’s speakers include Fed’s Tarullo and ECB’s Weidmann.

2012-01-17T08:17:00.001+08:00

Daily Trading Stance - Asia Jan 17 (Click link to view)

 Quiet markets overnight as the US celebrated Martin Luther King Day. EUR consolidated at lower levels after Friday’s sell-off
 S&P downgrades Europe’s EFSF though EU’s Juncker says this will not reduce lending capacity
 China’s Q4 GDP numbers will be the highlight for Asia. US returns with empire manufacturing for January
 Bank of Canada’s rate meeting not expected to produce any changes

Tight ranges overnight as US market holiday impacts

2012-01-17T07:29:00.000+08:00

We witnessed tight ranges and slow trading activity as the US holiday provided little impetus to trade. EUR continued to stabilize at lower levels after the Friday sell-off. Markets showed muted reaction to Moody’s comments echoing those of S&P saying France’s AAA rating may be under threat if the debt/GDP ratio continues to rise. EUR’s support was consolidated on ECB’s buying of Spanish and Italian bonds.

On the European data front, German wholesale prices were much lower in December, falling 3.0% y/y from 4.9% and flat m/m versus +0.7% m/m the previous month. Swiss producer prices, in contrast showed the opposite trait, rising 0.3% m/m versus a consensus view of -0.1% and -0.8% previously. On an annual basis prices fell 2.3% following a 2.4% decline in November.

Ranges have been tight in Asia so far with little in the way of macro inputs and developments to impact. On the data front the session kicks off with Japan’s tertiary industry index followed by Singapore’s exports data. China’s Q4 GDP will be a major highlight and most eagerly awaited by AUD traders. Industrial production, retail sales and fixed asset investment are also due. The European session starts with UK’s CPI/RPI numbers with BOE speakers out in force during the morning – King, Haldane, Cohrs and Jenkins all scheduled. Euro-zone CPI follows shortly thereafter followed by the ZEW surveys for both Germany and the Euro-zone.
The US returns from holiday with empire manufacturing data for January (with a growing concern that we may have already seen the best of this series) while the Bank of Canada holds its rate meeting , with nothing exciting expected to come out of it.

2012-01-16T08:22:00.001+08:00

Daily Trading Stance - Asia Jan 16 (Click link to view)

 S&P downgrades for Europe knocked a bullish-looking EUR lower on Friday. Rumours of the downgrade had been circulating during the European afternoon and the actual announcement knocked EUR to new 2012 lows.
 Cyprus, Italy, Portugal and Spain down 2 notches; Austria, France, Malta, Slovakia and Slovenia down 1 notch while Belgium, Estonia, Finland, Germany, Ireland and Luxembourg affirmed unchanged
 US data added to risk-off sentiment: US trade gap widens to $47 bln in Nov. but Mich. Confidence rallies to 7-mth high.
 US markets closed for martin Luther King Day today

SandP downgrades to Europe whack the EUR to new 2012 lows

2012-01-16T07:42:00.000+08:00

Any temporary EUR bulls looking for further EUR retracement were given a jolt late on Friday as S&P waged an assault on Euro-zone credit ratings with downgrades to 16 Euro-zone countries, France among them, while affirming Germany’s AAA rating. Cyprus, Italy, Portugal, and Spain were slashed by two notches, long-term ratings on Austria, France, Malta, Slovakia, and Slovenia, by one notch while long-term ratings on Belgium, Estonia, Finland, Germany, Ireland, Luxembourg, and the Netherlands were left unchanged. Rumours of the downgrade had been circulating during the European afternoon with the EUR already sliding from its 1-week high and the announcement catapulted the single currency to fresh 2012 lows. Thin markets ahead of the US long weekend did not help matters.

US data had also fostered a risk-off sentiment with the US trade gap widening to $47.8 bln in November from a revised $43.3 bln though Michigan confidence did improve to a 7-month high of 74.0 from 69.9 last. Wall St entered the long weekend on a gloomy note with JP Morgan’s earnings miss adding to the gloom from Europe’s downgrades. The DJIA closed down 0.39%, S&P down 0.49% and the Nasdaq down 0.51%.

Today’s Asian data releases focus on Japan’s machine orders, corporate goods prices and consumer confidence. UK Rightmove house prices also feature along with Australia’s lending data for house purchase in investment. ANZ job advertisements for December complete the picture. Europe sees German wholesale prices, Swiss producer and import prices together with Norway’s trade balance. US markets are closed for Martin Luther King Day so no events are scheduled.

2012-01-13T08:34:00.001+08:00

Daily Trading Stance - Asia Jan 13 (Click link to view)

 EUR rebounded overnight as ECB left rates unchanged and Draghi appeared to be in no hurry to cut rates. Positive comments from him and strong Italian and Spanish auctions fueled the move while weak US data compounded.
 US retail sales were a disappointment in Dec. despite reports of busy times. Weekly jobless claims came in at a 6-week high with upward revisions to last week
 Singapore retail sales will be the highlight for Asia

EUR manages a rebound on strong EU auctions, weak US data

2012-01-13T08:06:00.000+08:00

It was retracement time for the EUR overnight as more positive inputs from Europe and a weak set of US data saw the single currency rallying through January highs for a change. Spanish and Italian bond auction saw solid demand while an ECB’s no-change stance along with some more positive comments from Draghi in the press conference saw the EUR begin a short squeeze of over-stretched short positions. GBP tracked the EUR as the Bank of England also kept everything unchanged but weak industrial production data and disappointing result from retailer Tesco reignited the focus on the next phase of quantitative easing down the road. The NIESR GDP estimate for December showed slowing growth to just 0.1% from 0.3%.

US retail sales were a disappointment in December with headline sales rising a dismal 0.1% and core sales (ex-autos) unexpectedly falling 0.2%. Jobless claims were also higher, edging back towards the 400k mark and hit a 6-week high, with a mild upward revision to last week’s data adding to the gloom. The weekly consumer comfort index was barely changed at -44.7 while business inventories rose 0.3% from 0.8% the previous month. Despite the weak data, Wall St saw more comfort from the better mood out of Europe and rallied for the fourth day in a row – DJIA rose 0.17%, S&P 0.23% and the Nasdaq +0.51%.

Data releases in Asia are confined to Singapore’s retail sales for November. Europe will see UK PPI data and the Euro-zone trade balance while the North American session completes the week with trade data from both the US and Canada along with US import prices and Michigan confidence.

2012-01-11T08:22:00.001+08:00

Daily Trading Stance - Asia Jan 11 (Click link to view)

 EUR briefly tested above 1.28 versus USD as Fitch suggested France’s AAA rating was safe for 2012 and French IP beat forecasts
 However, market chatter the Ireland would need a second bailout and Greece needed more money than agreed in Oct. meant it was short-lived.
 Commodities all higher helping the AUD and CAD post gains
 Quiet on the data front today

EURUSD attempts above 1.28 overnight but only briefly...

2012-01-11T07:55:00.000+08:00

EURUSD flirted above the 1.28 mark briefly in the overnight session as Fitch noted that France’s AAA rating would probably survive 2012 intact and French industrial production data beat expectations (rising 1.1% m/m and 0.9% y/y from 0.1% and 1.7% respectively). However, a sustained push higher was not forthcoming as ECB’s Nowotny warned that the Euro-zone remains in a difficult situation and at risk of a mild recession while market chatter/rumour centred on the possible need of a second bailout for Ireland. The commodity space was well supported with gold breaking above the 200-day MA which bolstered the AUD through 1.0350 versus the greenback at one stage and oil’s burst through $102 p/barrel gave the CAD a lift.

US data releases were not mainstream with NFIB small business optimism matching forecasts with a 93.8 reading, its highest reading since February last year and up from the 92.0 recorded in November. The IBD/TIPP economic optimism also outperformed, rising to 47.5 from 42.8 and above consensus of 45.0. Fed speakers Williams and George noted that further Fed stimulus may be implemented if inflation and growth fall below Fed forecasts. Wall St climbed to a 5-month high with financials leading the way and materials sector buoyed by Alcoa’s upbeat forecast.

Another quiet data day for the Asian session with UK’s BRC shop price index, Australian job vacancies and Japan’s leading/coincident indices the only data on tap. Europe picks up the baton with Germany’s budget and GDP data for 2011 followed by UK trade data. The US session is relatively quiet with mortgage applications the only item scheduled though Fed speakers are out in force with Evans, Lockhart and Plosser on the wires. The release of the Fed’s Beige Book concludes the session.

2012-01-10T08:17:00.000+08:00

Daily Trading Stance - Asia Jan 10 (Click link to view)

 EUR found some support at 16-month lows with little in the way of news to determine why – probably a short-term squeeze
 German data mixed – trade surplus very strong but not reflected in a weak IP number
 US consumer credit exploded in November, hitting $20.4b, biggest jump in over a decade suggesting banks loosening credit restrictions – Wall St a touch higher on the day
 China trade data expected sometime today so keep an eye out for the headlines

EUR finds a temporary base but little news to support

2012-01-10T07:44:00.000+08:00

A relatively calm session overnight with the EUR managing to find some support off 16-month lows. German data was mixed with trade numbers looking strong in November (surplus rising to €16.2b from revised €11.5b) but not reflected in industrial production data which fell 0.6% on month after a 0.8% increase the previous month. The Merkel/Sarkozy summit came and went with little new for markets to latch on to. The CHF took SNB’s Hildebrand’s resignation in its stride with only a small kneejerk reaction lower in EURCHF but, with limited impact on official policy as Jordan takes over the reins in the interim, the 1.20 floor remains intact and unchallenged.

The US data calendar was bare overnight but a late release of US consumer credit data suggested that banks are relaxing credit criteria and returning to some semblance of normality as total credit jumped to $20.37 bln from $6.02 bln, the largest jump in over a decade, with non-revolving credit (non-credit card) rising a whopping $14.8 bln. Wall St posted modest gains on the day with the DJIA up 0.27%, S&P +0.23% and the Nasdaq +0.09%. Alcoa, the first company to report Q4 earnings in the DJIA, beat forecasts on revenue yet still recorded a loss on weaker aluminium prices after the bell.

The Asian data calendar is more busy today with UK’s BRC Sales data and RICS house price balance kicking off the session. Australian building approvals for November follow shortly after with China trade data for December expected sometime during the day. The European data slate is Scandinavia-focused with Sweden’s budget balance and industrial production along with Norway’s CPI and PPI. The North American session features Canada’s housing starts and US NFIB small business optimism, IBD/TIPP economic optimism, JOLTs job openings and wholesale inventories. Fed speakers are out in force with Williams, Pianalto and George all scheduled to speak.

2012-01-09T08:21:00.001+08:00

Daily Trading Stance - Asia Jan 09 (Click link to view)

 Negative news for the EU kept the EUR under pressure on Friday and this extended when the US non-farm payroll and unemployment report came in better than expected.
 US added 200k jobs in Dec, up from 100k in Nov. and the 8.5% unemployment rate was the best since March 2009  Japan on holiday today and a quiet Asian data slate (Oz retail sales the highlight)
 No US data today

EUR sags on weak data, deteriorating Greek headlines

2012-01-09T07:43:00.001+08:00

The EUR sagged further on Friday following a combination of weak European data releases and strong US ones. First off, Euro-zone retail sales and confidence indicators were weak and compounded by very soft German factory orders (-4.8% m/m and -4.3% y/y) which started a slow but steady decline which extended once the US reported strong non-farm payrolls and the strongest unemployment number since March 2009. As mentioned, the slide was slow and gradual with extreme short positioning urging some caution.

Weekend news added more pressure on the EUR with local press reporting that Greek Private Sector Involvement plan (PSI) discussions were very difficult with rumours circulating that the IMF is now pushing for a forced debt restructuring and an 80% haircut for bondholders. Adding to the US dollar’s rally, Fed’s Bullard commented that earlier QE measures by the Fed had successfully boosted inflation and rescued the economy from deflation with further measures were available if necessary but likely not needed.

Today’s Asian data slate is relatively quiet with Australia’s new home sales, retail sales and the UK’s Lloyds employment confidence the only items on tap while Japan is away on holiday. Swiss unemployment data kicks off the European session with German trade data to follow. Swiss retail sales, German industrial production, EU investor confidence are also scheduled while we can expect some headlines from yet another Merkel/Sarkozy summit. The North American session focuses on Canada’s building permits, business outlook for future sales and the senior loan officer survey.

2012-01-03T08:22:00.001+08:00

Daily Trading Stance - Asia Jan 03 (Click link to view)

 WISHING YOU ALL A VERY HAPPY NEW YEAR
 Some mainland European markets opened yesterday with a mildly positive tone after China PMI data rebounded above the 50 threshold in December. EUR fails to capitalize with EURJPY falling through psychological 100 mark but other risk currencies benefit
 Japan and New Zealand markets still closed today
 China non-manufacturing PMI will be the data highlight for Asia

First data of the year showing some improvement but EUR still threatened

2012-01-03T07:38:00.000+08:00

HAPPY NEW YEAR!

Markets opened with a sputter yesterday with only mainland Europe open for business. Those equity markets that were open rallied between 2-3% but the EUR still remained soft in thin trading with EURJPY pushing strongly through the 100 mark to hit a new all-time low of 99.40. Other risk currencies fared better with AUDUSD falling just short of the 1.03 handle and NZDUSD 0.78.

The first data releases of the year were generally better than expected with China’s official manufacturing PMI rebounding above the 50 mark to 50.3 after last month’s dip to 49.0 lending the slightly positive air to equities. Sweden’s PMI also improved from last month with a move to 48.9 from 47.6 while those from both Germany and the EU were not quite so convincing – German PMI up to 48.4 from 48.1 and EU-wide flat at 46.9. Note all Europe’s PMI still below the crucial 50 contraction/expansion threshold.

Expect the Asian session to be relatively orderly with Japan and New Zealand still out on holiday. So far, data has shown Australia’s manufacturing PMI also with a strong improvement to 50.2 from 47.8 so the mood is quite positive. Still to come on the data front is Singapore’s advance Q4 GDP data (expectations for a 5% q/q contraction from +1.9% last) along with UK’s Lloyds business barometer and China’s non-manufacturing PMI.

European data focuses on PMI data from Norway, UK and Switzerland along with minutes of the last Riksbank meeting (25bp cut) and Germany’s unemployment rate. North America returns with construction spending, ISM manufacturing and prices paid and the minutes of the last FOMC meeting.

Wishing you all a happy and prosperous 2012.

2011-12-30T08:38:00.001+08:00

Daily Trading Stance - Asia Dec 30 (Click link to view)

 EUR reached the next tech support level at 1.2850 last night, only to rebound on another series of better US data, German comments about a larger contribution to ESM in 2012, soft German inflation data and a relatively OK Italian bond auction
 Chicago PMI beat forecasts and pending home sales very firm but initial jobless claims slight worse than f/c with mild upward revision to last week’s data
 HSBC China PMI for Dec highlight on data front for Asia – but be wary of month/year- end flows (likely to favour USD)
 WISHING YOU ALL A VERY HAPPY NEW YEAR!!

2011-12-29T09:07:00.001+08:00

Daily Trading Stance - Asia Dec 29 (Click link to view)

 Thin markets caught by mild USD bullish flows exaggerating a move lower for most currencies
 Italy/Germany spreads widened despite a well-received Italian debt auction
 No data for Asia today, buy expect year-end flows to start to pick up in next two session – likely to be USD supportive

2011-12-28T08:25:00.001+08:00

Daily Trading Stance - Asia Dec 28 (Click link to view)

 Currency markets bound by tight ranges in post-Christmas trading. Oil prices higher as Iran threatens to block Straits of Hormuz – CAD given a mild lift accordingly
 Japan data already released – generally disappointing: CPI soft with core data down 1.1% y/y. Industrial production below-forecast -4.0%
 No more data for Asia so expect to sit in tight ranges
 Almost barren data slate for Europe/US as many centres return after an extended break

Quiet markets continue after the holidays

2011-12-28T07:51:00.000+08:00

Currencies remained bound in tight ranges yesterday as a number of centres enjoyed an extended Christmas break. Currency levels are not much changed from pre-Christmas levels and activity remains definitely muted. Oil prices have seen a jump higher as Iran threatens to block the Straits of Hormuz if oil consuming nations embargo exports (note Saudi Arabia assured they will step up output to replace Iran’s) which has given the CAD a slight lift. The EUR’s next testing moment will be Italy’s debt auction tomorrow but in the meantime expect quiet trading conditions.

Yesterday’s US data releases were mixed with the Conference Board’s consumer confidence rising to 64.5 in December from 55.2 (highest reading since April). Manufacturing activity gave mixed signals with the Richmond Fed index rising to +3 from zero (+5 expected) while the Dallas Fed equivalent deteriorated sharply to -3.0 from +3.2. S&P/CaseShiller house price data for October disappointed with falls of 0.62% m/m and 3.4% y/y though the time lag for the series makes it irrelevant (other housing data has been showing more positive signs for the housing market of late).

This morning’s early data from Japan showed further deflationary tendencies for the economy. National CPI for November came in at -0.5% y/y with core readings at -1.1% y/y. The Tokyo data for December was less severe with a -0.4% y/y headline number but core readings still (de-)elevated at -1.1% y/y. The jobless rate held few surprises, unchanged from last month at 4.5% and bang in line with expectations with a minor uptick to 0.69 from 0.67 in the job/applicant ratio.

Still to come for Asia we have the Japan retail trade and industrial production and the data slate for Asia is complete. Europe’s releases are minimal with Sweden’s household lending and retail sales together with Swiss leading indicators the only items scheduled. Nothing scheduled for North America.

2011-12-23T08:21:00.001+08:00

Daily Trading Stance - Asia Dec 23 (Click link to view)

 Wider ranges for the EUR overnight as liquidity dries up – but we still finish almost unchanged on the day
 US data was mixed but generally erring on the more positive side. US Q3 GDP revised lower to 1.8% from 2.0% and Chicago Fed activity index slid. However, a strong final Michigan confidence number, weekly jobless claims falling to lowest since April 2008 and improvements in weekly consumer comfort and economic expectations index helped Wall St to rally
 Japan holiday today and the last trading day before the Christmas holidays so expect a quiet Asian session
 Wishing you all a very Merry Christmas!

Markets wind down for Christmas - Japan holiday today

2011-12-23T07:52:00.001+08:00

Currency markets were slightly more volatile overnight with ranges widened amid a slew of mixed data. The EUR ran into resistance above 1.31 after an early run-up with the customary French downgrade rumour among the factors standing in front of the rally. But activity was light and we eventually settled mid-range and Asia’s open is at the same level as yesterday.

The slew of US data releases were a mixed bag but generally extend the recent spate of better than expected numbers. The fly in the ointment was a surprise downward revision to Q3 US growth – down to 1.8% q/q from 2.0% previously – and a slump in the Chicago Fed activity index to -0.37 in November from -0.11 but all other data was more positive. The weekly jobless claims fell to its lowest since April 2008 reflecting better labour conditions while the final Michigan confidence index for December was pushed higher to 69.9 from 67.7. The weekly consumer comfort index improved to -45 from -49.9 and economic expectations rose to -17 from -32 (its best reading since May). Finally, leading indicators were better than expected at +0.5% but below last month’s 0.9%. The better data encouraged a mild Wall St rally though volumes were thin. The DJIA rallied 0.51%, S&P 0.83% and the same for the Nasdaq.

The last day of trading before the Christmas holidays and a Japan holiday is expected to leave activity very subdued in Asia today. Data releases are confined to Singapore’s CPI and industrial production around lunchtime while the European session has only data out of the UK – house loans and index of services. North America has another relatively busy slate with US durable goods orders, personal income/spending, the PCE data and new home sales. Canada’s GDP data for October accompanies.

It just remains to wish all our readers a very merry Christmas!

2011-12-22T08:32:00.001+08:00

Daily Trading Stance - Asia Dec 22 (Click link to view)

 EUR rallied overnight following the announcement of an €489 bln take-up at the ECB’s 3-year LTRO (300-350 bln expected) but soon stalled and reversed as Italian spreads and yields continued to widen.
 S&P downgrade for Hungary to junk, rumours of French downgrade forced the retreat
 NZ Q3 growth helped by Rugby World Cup – up 0.8% q/q, 1.9% y/y
 Busy US data slate today with Chicago Fed, third Q3 GDP estimate, weekly jobless claims, consumer comfort and economic expectations, final Michigan confidence, leading indicators and house price index

EUR whipped about as ECB allotts €489 bln in 3-year LTRO

2011-12-22T07:54:00.000+08:00

The initial reaction to a larger-than-expected take-up of the ECB’s 3-year LTRO facility was for the EUR to rally to just shy of 1.32 versus the greenback. €489 bln was allotted with 523 banks taking part but subsequently a widening of Spanish and Italian spreads, plus slack rumours of a French downgrade, and an actual downgrade for Hungary by S&P saw the single currency beat a swift retreat with dwindling liquidity a factor in accelerating the decline down to 1.3025. The BOE minutes held nothing new with a unanimous decision to keep rates and QE totals unchanged though some members thought additional QE might be needed amid a deteriorating outlook.

On the data front, a strong Canadian retail sales number went unnoticed while US existing home sales were also firm at +4.0% m/m (expectations +2.2%) though past yearly sales were revised lower. Wall St had a mixed session with the DJIA eventually closing up 0.03%, the S&P up 0.19% and the Nasdaq down 0.99% with oracle the major drag there.

This morning saw the release of New Zealand’s Q3 GDP numbers and produced a mixed performance. On a q/q basis the outcome was a better than expected +0.8% and a strong rebound from Q2’s 0.1% but on an annualized basis growth was below consensus at +1.9% with Q2’s growth revised downwards to 1.1% from 1.5%. The Rugby World Cup played a major part in the better Q3 performance but the rest of the economy continued to show some resilience. The NZD had a minor surge higher but quickly reverted back to pre-data levels. The rest of the data calendar is quiet in Asia with Japan’s portfolio flows and the Bank of Japan’s monthly economic report the only items scheduled.

From Europe we can expect Sweden’s PPI, Norway’s unemployment rate and UK’s final Q3 GDP data. A busy US session kicks off with Chicago Fed activity followed by the third estimate for Q3 GDP, weekly jobless claims and Bloomberg consumer comfort and economic expectations indices. The session finishes with final Michigan confidence for December, leading indicators for November and October’s house price index.

2011-12-21T08:34:00.000+08:00

Daily Trading Stance - Asia Dec 21 (Click link to view)

 EUR rallied overnight following slightly better EU data, a good Spanish bond auction (oversubscribed and yield lower) and banks tapping the ECB’s 3-year LTRO facility
 US housing data also beating forecasts by a large margin helping sentiment
 Sweden’s Riksbank cuts rates 25bp in a widely expected move

EUR picks itself up from the lows on better data, ECB auction

2011-12-21T07:49:00.001+08:00

Europe’s single currency enjoyed a mild rebound overnight as Spain completed a successful auction (sold more than their target and at a lower yield), EU data erred on the positive side and banks tapped the ECB’s 3-year LTRO offer. The risk rallied extended to other currencies with GBP performing well despite warnings from BOE’s Bean that they stood ready to inject further QE measures in February if needed. AUD recovered the 1.00 handle as oil prices rebounded and firmer stocks helped the broader risk-on trade. Rumours also circulated of an additional Chinese rate easing. Sweden’s Riksbank also cut rates by 25bp in a widely expected move. The only negative news impacting the risk rally was the IMF warning that Portugal’s reform progress faces risks from rising tensions in Europe while Fitch placed a number of Italian and Spanish banks on creditwatch negative.

US housing data overnight was strong with November housing starts putting in a healthy 9.3% m/m increase (a mere +1.1% expected) and building permits were just as encouraging with a 5.7% m/m increase (1.4% decrease expected). Wall St posted strong gains, taking the lead from Europe and positive US data with the DJIA rallying 2.87%, S&P +2.98% and the Nasdaq +3.19%. However, Oracle reported poor earnings results after the bell.

Today’s Asian data calendar is more populated with Japan’s trade data for November due imminently followed by UK GfK consumer confidence and NZ credit card spending. We also hear the result of the latest 2-day BOJ meeting (though nothing earth-shattering and new is expected to emerge). From Europe we can expect German import prices, Swiss money supply, Swedish confidence indicators, Norway’s unemployment rate and the Bank of England minutes of the last MPC meeting. We also see the results of the ECB’s 3-year LTRO auction with the FT suggesting a total of about €360 bln as a good starting point. The North American session features MBA mortgage applications and existing home sales along with Canada’s house price index and retail sales.

2011-12-20T08:21:00.001+08:00

Daily Trading Stance - Asia Dec 20 (Click link to view)

 Tight ranges for currencies overnight – market underwhelmed by EU finance ministers’ meet – they merely rubber-stamped the IMF lending agreed at the EU summit (minus the UK’s vetoed funds). ECB’s Draghi stressed need for banking sector recapitalization, acknowledged downside risks for growth going forward.
 RBA minutes will be the highlight for Asia today

Steady as she goes - Tight ranges envelope activity overnight

2011-12-20T07:42:00.000+08:00

Signs of markets winding down in the run in to the holiday season were evident in the tight ranges seen in currency markets in both the European and North American sessions. The meeting of EU finance ministers was a non-event with the outcome merely a rubber-stamping of the EU summit deal to provide EUR 150 bln of funding to IMF general funds. ECB’s Draghi spoke at the EU parliament but offered nothing new apart from stressing the need for bank sector recapitalization and recognizing downside risks ahead to growth. Note the UK’s stance not to contribute to EU-IMF loans remained unchanged.

Data during the North American session was mildly positive with Canada’s retail sales rising 0.9% m/m in October, higher than the upwardly-revised +0.5% the previous month, and continuing the recent spate of upward surprises. The US NAHB housing index also improved, rising to 21 from 19 prior and above consensus of 20. Wall St was hampered by a slide in financial counters (Bank of America in a late slide below $5 for the first time in nearly 3 years) with the DJIA losing 0.84%, S&P 1.17% and the Nasdaq 1.26%.

The highlight for today’s Asian session will be the release of the RBA minutes for the December meeting (second rate cut in a row) with the RBA’s outlook for the economy both at home and abroad awaited and hints of further rate cuts. Otherwise we have Japan’s all industry activity and leading/coincident indicators to look forward to. The European session is a tad busier than yesterday with German GfK consumer confidence, producer prices and IFO surveys along with Swiss trade data, Sweden’s Riksbank meeting (surveys suggesting an early Christmas present of a 25bp cut) and the UK’s CBI reported sales. The North American session features Canada’s CPI data for November and US housing starts and building permits.

2011-12-19T08:35:00.001+08:00

Daily Trading Stance - Asia Dec 19 (Click link to view)

 A rangebound session for the EUR on Friday with the single currency holding steady despite a continued barrage of gloomy Euro-zone headlines.
 Fitch placed France, Italy and 4 other currencies on review saying that a comprehensive solution to the EU debt crisis is technically and politically beyond reach
 Slow on the data front today, Euro-zone finance ministers are meeting today.

A steady start to the last week of trading before the holidays

2011-12-19T07:54:00.001+08:00

We saw markets relatively subdued on Friday with the EUR eking out small gains at the margin despite a continued barrage of gloomy headlines. On the positive side a senior Troika official said it was hoped to complete talks on a new Greek bailout by mid-January but on the negative side Fitch issued a credit warning on France, Italy and four other Euro-zone countries saying that a comprehensive solution to the EU debt crisis is technically and politically beyond reach (note the UK’s Guardian newspaper followed this up with a piece suggesting a French downgrade could come “within days”). Meanwhile reports are circulating that Euro-zone finance ministers will meet today.

The US session was also a range-bound affair with US inflation data the only release scheduled. Headline prices in November were marginally below expectations (flat versus +0.1% month-on-month and 3.4% versus 3.5% year-on-year) while core prices were the opposite at 0.1% higher than expected both month-on-month and year-on-year (0.2% and 2.2% respectively). An early rally on Wall St fizzled as the gloomy headlines from Europe continued. Equities finished mixed with the DJIA losing 0.02% while the S&P and Nasdaq posted gains of 0.32% and 0.56% respectively).

It has been a quiet start to the final leg of trading before the major holiday season is upon us. Opening levels for currencies were barely changed from those on Friday. Date releases come early and are mostly second-tier. New Zealand NBNZ activity outlook and business confidence are out soon then it is quiet until Japan’s store sales data towards the end of the session. Europe features Euro-zone current account and construction output along with any headlines from the EU finance ministers’ meeting. The North American session has only Canada’s wholesale sales and the US NAHB housing market.

2011-12-13T08:28:00.001+08:00

Daily Trading Stance - Asia Dec 13 (Click link to view)

 EUR slid back to early-Oct lows as three ratings agencies expressed disappointment of EU summit outcome, raising specter of further downgrades
 France’s Sarkozy comments that losing AAA rating would be additional difficulty, but not insurmountable
 Slow data day again in Asia with most releases second-tier

EUR slides as ratings agencies unimpressed with EU summit outcome

2011-12-13T07:45:00.000+08:00

With the least amount of headlines, the EUR made its largest move lower this month in yesterday’s overnight session. The EU summit was the major factor in headlines with all three ratings agencies expressing disappointment at the outcome raising the specter of additional downgrades and the EUR slid to early-October lows as a result. It was interesting that France’s Sarkozy commented that the loss of a AAA rating would be an additional difficulty, but not insurmountable, as if to say he expects it to be inevitable.

There were no data releases to impact trading overnight and wall St took its cue from the gloomier tone out of Europe and gave back all of Friday’s gains. The DJIA closed down 1.34%, S&P down 1.49% and the Nasdaq down 1.31%.

Today’s Asian session is expected to be range-bound again, with the EUR no doubt attracting selling interest on any rally. On the data front, Japan’s tertiary industry index kicks off the releases followed by Australia’s house affordability, dwelling starts and NAB business conditions/confidence indices. Manpower surveys from both Japan and China complete the picture (Singapore’s was released during the night and was 16% compared with 31% in Q4 2011).

Heading into Europe and we can expect Sweden’s CPI and unemployment, UK’s DCLG house prices, CPI and RPI and a speech from BOE’s Dale. We also get to see the ZEW surveys from both Germany and the Euro-zone. The US session features NFIB small business optimism, advance retail sales, IBD/TIPP economic optimism, JOLTs job openings and business inventories.

2011-12-12T08:25:00.001+08:00

Daily Trading Stance - Asia Dec 12 (Click link to view)

 EUR whipped around Friday- rallied on headline China creating $300 b SPV to invest in Europe/US assets but once revealed that it was planned a long time ago (not new investment) the EUR gave back all gains
 UK trade deficit smallest since April but no benefit for GBP
 China’s exports and imports slower in October resulting in smaller trade surplus (US also showed narrower deficit) Slow start to the week on the data front – busier later on

EUR steady at the start of a new week

2011-12-12T07:58:00.000+08:00

An erratic close to the week on Friday as markets digested the plusses and minuses of the EU summit earlier in the week. EUR had a spurt higher following headlines that China was creating a US$ 300 bln investment vehicle, supposedly to invest in Euro-zone and US assets, with the timing of the announcement suggesting this was part of a new initiative. However, on a closer look it appears this vehicle had been planned for a while and so the EUR gave back most of its gains.

On the data front, UK trade data showed a vast improvement with the smallest trade deficit since April while the US trade deficit also shrank to US$43.5 bln in October (also reflected in the slowdown in China exports for the month too, more below). Michigan confidence continued its recent run of improvements with a stronger 67.7 reading. Wall St rebounded on the better (headline) mood out of Europe with the DJIA posting gains of 1.55%, S&P up 1.69% and the Nasdaq up 1.94%.

Over the weekend China released its trade data for October which showed a further decline in exports for the month (up 13.8% y/y versus +15.9% last) but signs of the slowdown hitting harder was seen in the slower pace of imports of +22.1% y/y versus 28.7% last. This resulted in a narrowing of the trade surplus to $14.52 bln from $17.03 bln.

Today’s start has been mild, with tight ranges seen in most currency pairs. On the data front we can expect Australia’s home loans, and trade data along with Japan’s consumer confidence and machine tools data. Heading into Europe and we can see Germany’s wholesale prices. The American data slate is empty.

2011-12-01T08:26:00.001+08:00

Daily Trading Stance - Asia Dec 01 (Click link to view)

 Major central banks announced vast and cheaper USD liquidity to help the straining global financial system while China chipped in the a 50bp RRR cut (some suggest to preempt a poor PMI number later today)
 Risk appetite off to the moon – equities up 4-5% and the USD gives back all the last week’s gains
 US data also firm – ADP employment best since Feb (+206), Chicago PMI rebounds to 62.6 from 58.4, pending home sales up 10.6% m/m
 All eyes on today’s China PMI….the rest to follow in Europe and US

Central banks to the rescue with USD liquidity; China cuts RRR 50bp

2011-12-01T07:43:00.000+08:00

A double whammy of major central banks announcing vast and cheaper amounts of USD liquidity and China cutting its reserve ratio requirements by 50bp led risk appetite sharply higher during the European session.

Central banks from the US, Europe, UK, Japan, Switzerland and Canada lopped 50bp off the cost of USD swap transactions in an effort to help the straining global financial system. The timing of the Chinese RRR cut might suggest a coordinated approach but some suggest it was to preempt a very weak PMI number due later today. The move pushed all EU fears onto the back burner with equities and risk currencies enjoying a field day, with the usual month-end volatility swallowed up by the earlier moves.

To cap it all off, US data releases looked encouraging on the headline with the fore-runner to Friday’s NFP, the ADP employment change, posting its biggest monthly gain since February. The Chicago PMI also beat expectations with a rebound to 62.6 from 58.4 last with 58.5 expected while the NAPM Milwaukee reading also firmed to 56.7 from 55.5. October’s pending home sales were also firm at +10.4% m/m after a 4.6% decline the previous month. The combined effect of central bank moves and data saw an impressive rally on Wall St with the DJIA surging 4.24%, S&P 4.33% and the Nasdaq 4.17%.

At the start of a new month we have the usual tidal flow of PMI data from across the globe. The Australian number gave us few clues with a slight improvement to 47.8 from 47.4 (though still heavily in contraction territory) and it will be the China data that grabs the attention (rumours flying round Asia of a poor number, the flash HSBC PMI slumped to 48.0 from 51.1). Elsewhere on the Asian data calendar we have Australia’s retail sales and building approvals and weekly Japan portfolio flows and vehicle sales.

Europe kicks off with Swiss Q3 GDP ahead of the PMI numbers while the US session sees the weekly jobless claims, consumer comfort index, construction spending and November’s ISM. Mixed in the central banks’ headlines was a Reuters flash that Italy’s Monti, France’s Sarkozy and Germany’s Merkel would make an “important announcements” about Europe in the “coming days” – so keep an eye out for that.

Welcome to December.

2011-11-30T08:32:00.001+08:00

Daily Trading Stance - Asia Nov 30 (Click link to view)

 Something for bulls and bears overnight with net effect the EUR reverts back to Asia’s closing with volatility in between
 Italy’s bond auction successful (but expensive!), Finland calls no confidence vote, Greece gets the next tranche of aid
 US banks downgraded late in NY session as S&P revises criteria and methodology for the banking sector
 Month-end today so watch for volatility later, meantime Asia likely to sit in ranges

EUR twists and turns overnight but back to square one

2011-11-30T07:46:00.000+08:00

Headlines for both bulls and bears overnight led the EUR through a merry dance of ups and downs before finishing nearly unchanged. The single currency had an early bid tone following a relatively successful Italian bond auction (though yields still unbearably high) but soon topped out as Finland called a no-confidence vote and news broke that the ECB had failed to fully sterilize its SMP purchases. In the NY session it emerged that Euro-zone finance ministers had approved Greece’s next tranche of aid and this helped consolidation above 1.33 versus the dollar.

On the US data front, S&P/CaseShiller house prices were down 0.57% m/m and -3.59% y/y in September while consumer confidence had a surprising upturn in November, registering a 56.0 reading from revised 40.9 in October with the jobs outlook differential one of the major inputs. Fed speakers continued to show the divide among FOMC members with Yellen saying that scope remains for additional easing either in the form of rate guidance or asset purchases while Lockhart remained skeptical that more quantitative easing would help the economy. Late in the session S&P downgraded a slew of US banks following an adjustment in criteria and methodology.

Month-end today so we may see some volatile activity into the European session. Asia so far looks content to hold a 1.33-1.3350 range with data releases limited to Japan industrial production, Australia new home sales, private sector credit and private capital expenditure. We also see UK GfK consumer confidence and Singapore money supply.

The European session kicks off with German retail sales followed by Sweden’s current account and German unemployment. Norway’s retail sales are up next and then Euro-zone CPI and unemployment estimates while Swiss leading indicators complete the session. The North American session features Canada’s raw material and industrial product prices along with September and Q3 GDP data, Teranet/National Bank house prices. US releases are limited to Chicago PMI, pending home sales and the NAPM-Milwaukee index.

2011-11-29T08:23:00.001+08:00

Daily Trading Stance - Asia Nov 29 (Click link to view)

 The risk-on trade/short squeeze continued overnight though EUR struggled to make it past 1.34 versus USD. Belgium’s bond auction well received after budget deal announced/despite S&P downgrade
 Wall St surged on late buying though volumes light
 US data flows mixed – new home sales up 1.3% but Dallas Fed manufacturing activity below f/c 3.2

AUD outperforms the risk-on trade (short squeeze?) continues

2011-11-29T07:44:00.001+08:00

The “risk-back-on” move, or the classic bear market squeeze, that kicked off in Asia yesterday extended into the European and US sessions, though there were no additional positive news bytes to drive the move. Chatter that the rumoured IMF help for Italy was well beyond its capabilities (in terms of funding) went unnoticed while Belgium’s advances on a budget deal were rewarded by the market with a successful auction, despite the S&P downgrade on Friday. EUR struggled to make it past 1.34 versus the US dollar however but the best performance for the risk on trade came from the AUD which rose 2.6% versus the greenback.

Wall St gapped higher, ending a 7-day slide, on EU debt hopes and headline strong performance by Black Friday retail sales but volumes were reportedly light suggesting that a large amount of skepticism still prevails. US data flows were light with new home sales up 1.3% m/m in October while the Dallas Fed manufacturing index echoed what we have seen from similar regional indices with a weak 3.2 reading versus 5.0 expected but a mild improvement from last month’s 3.2.

Data today is again Japan-centric with the jobless rate already released – rising to 4.5% after last month’s surprise dip to 4.1% (some mean reversion there) with the job/applicant ratio steady at 0.67. Next up we have retail trade and large retailers’ sales. The European session kicks off with Swiss consumption indicators and UK Nationwide house prices along with Sweden’s Q3 GDP, Norway’s credit indicator growth and UK consumer credit and money supply. Euro-zone releases include confidence and business climate indicators while UK Chancellor George Osborne makes his autumn budget statement to the House of Commons.

The US data slate is a tad busy with S&P/CaseShiller house prices, consumer confidence and house price index. Fed speakers Yellen, Raskin, Lockhart and Williams will be on the newswires.

2011-11-28T08:33:00.001+08:00

Daily Trading Stance - Asia Nov 28 (Click link to view)

 EUR generally weaker on Friday with high Italy yields, Fitch downgrade for Portugal and S&P downgrade of Belgium adding to the pressure
 Talk SNB would lift EURCHF peg stalled the decline to close mid-range in a holiday-affected NY session
 W/e press more positive – Italy’s La Stampa says IMF preparing EUR600 bln loan for Italy (not sourced) and strong "Black Friday" sales in US lifting risk appetite at the start of the week

Risk appetite starts the week strongly on EU rumours

2011-11-28T07:50:00.000+08:00

EU debt concerns pressured the EUR early in the overnight session Friday with A Fitch downgrade to Portugal and S&P downgrade of Belgium cementing the doom and gloom mode. In addition Italy yields touched the 8% level (a level clearly unsustainable for the beleaguered nation). Liquidity was thin as the US enjoyed an extended Thanksgiving holiday and moves exaggerated down to just above the 1.32 mark. However, rumours that the SNB was about to shift the CHF peg (seen buying EURUSD and reports of a 1700GMT announcement) helped lift the pair off the base for a mid-range NY close. (At the weekend SNB’s Jordan said they would act if CHF strength worsens the economic outlook).

Weekend news was a tad more encouraging with the so-called “Black Friday” sales in the US surging to their highest levels since 2007 despite the uncertain outlook for the economy. In addition, Italian press reported (but without naming sources) that the IMF was preparing a €600 bln loan for Italy (though perhaps a bit far-fetched) and Belgium’s downgrade spurred them to finally reach a 2012 budget agreement helping to kick the week off with a better risk appetite. NZD showed minor reaction to New Zealand’s election result where the ruling centre-right national party was returned to power.

We start a busy data week (switching to a new month mid-week) with new Zealand’s business confidence and activity outlook, UK’s business barometer and Hometrack housing survey and Japan’s small business confidence. The European session kicks off with Sweden’s retail sales and trade balance, CPI releases from various German states, CBI reported sales from the UK and German GfK consumer confidence. The US returns from the quasi long weekend with US new home sales and the Dallas Fed manufacturing activity.

2011-11-24T08:34:00.001+08:00

Daily Trading Stance - Asia Nov 24 (Click link to view)

 Disappointment that Germany failed to auction all its 10-year bonds y’day sent the EUR tumbling further with Fitch comments that France could not weather further shocks without implications for its AAA rating also undermining
 Flash PMIs out of Germany and EU echoed those in China – continued weaker trend
 US data generally below f/c adding to the risk aversion theme
 US Thanksgiving today but markets may not be all that quiet

2011-11-23T08:27:00.001+08:00

Daily Trading Stance - Asia Nov 23 (Click link to view)

 Wild gyrations for the EUIR again overnight though ranges were quite contained. Periphery (and core! Belgium, France, Austria) bond yields/spreads continued to widen capping any kind of EUR short squeeze
 US Q3 GDP revised lower to 2.0% from 2.5% - lower consumption and inventories the cause
 FOMC minutes show Fed ever willing to consider more accommodation on the monetary policy front
 Japan holiday to keep Asia quiet ahead of China flash HSBC PMI manufacturing release
 Busy US session for data on effectively the last trading day of the week with Thanksgiving approaching

Dovish FOMC minutes help prevent a deeper EUR slide

2011-11-23T07:55:00.000+08:00

It was another choppy session for the EUR overnight though activity was confined to relatively tight ranges. Periphery yields/spreads continued their inexorable crawl higher which put paid to an early squeeze while the single currency remained capped by Germany’s opposition to a greater role for the ECB in resolving the crisis (effectively becoming lender of last resort and printing money). Upward pressure was also noted on core nation bond yields ie. France, Belgium and Austria.

The North American session saw the release of the first revision to Q3 GDP data which disappointed at 2.0 percent q/q from 2.5 percent previously with a slight knockdown in personal consumption to 2.3 percent from 2.4 percent and lower inventories the major factors in the revision. The more forward-looking components also pointed to further weakness ahead in Q4 and Q1 2012. The FOMC minutes showed “a few members” discussing the possibility of more accommodation on the monetary front while the economic outlook suggested real GDP would accelerate gradually next year and in 20123 (at odds with the data projections?). The minutes generally seen as more dovish with US Treasuries pushing higher in the aftermath. Meanwhile CAD performed well following a strong retail sales number (up 1.0 percent m/m and core sales up 0.5 percent).

The Japan holiday today looks to be consigning the Asian session into a moribund, tight-ranged state with data releases minimal. That said, the one data release which could be a market mover is the flash HSBC manufacturing PMI data for November. Last month showed a rebound back above the 50 mark to 51.1 but given the external situation it is hard to believe that this could be repeated. The other data releases are Australian construction work done and Singapore’s CPI.

German and EU flash PMI numbers kick off the European session along with Norway’s unemployment data. The BOE minutes is expected to continue to reflect the aggressively dovish rhetoric on the UK economy from MPC members since the meeting and should keep GBP on the back foot. Euro-zone industrial new orders complete the session.

Effectively the last trading session of the week for the US, as they celebrate Thanksgiving tomorrow sees a jam-packed data calendar with durable goods orders, personal income/spending, PCE deflator, initial jobless claims, Bloomberg consumer comfort, Kansas City Fed manufacturing and the final Michigan confidence index.

2011-11-22T08:29:00.001+08:00

Daily Trading Stance - Asia Nov 22 (Click link to view)

 EUR held up well overnight despite a number of negatives – Spanish yields firmer, Moody’s warns higher borrowing costs, low growth may impact France’s AAA rating, EU Rehn and ECB’s Stark comment crisis is spreading to core EU nations.
 Commodity currencies trade very heavy as display of risk off sentiment – AUD and CAD at 1-month lows as gold closes below 1,700 mark first time in 1 month
 Quiet on the data front today – US Q3 GDP revision and FOMC minutes will be the highlight

EUR holds up well despite a host of negative inputs

2011-11-22T07:46:00.000+08:00

Another overnight session where a general “risk-off” theme dominated with Spanish bonds still under pressure, despite further buying by SMP, comments from EU’s Rehn and ECB’s Stark that the EU debt crisis had spread to core nations, zero chance of the US SuperCommittee cutting a budget deal before the deadline and Moody’s warning of a possible French downgrade all taking their toll on risk appetite.

The new Spanish government found the honeymoon period very short-lived as Spanish 10-year yields edged past last Thursday’s high, despite additional bond buying by the ECB. The US SuperCommittee failed to deliver anything concrete on budget reductions raining more uncertainty on proposals to extend current incentive programs (payroll tax cuts, extended unemployment benefits etc.). Meanwhile, UK’s Cameron mulled contagion fears for the UK from the EU debt crisis.

Despite all the negatives, EUR held up well and the risk-off trade was more pronounced with the likes of GBP and commodity FXers AUD and CAD, with both the latter currencies hitting lows for the month, helped along by gold’s move below the 1,700 mark for the first time since the start of the month and softer oil prices.

We have an almost barren data slate in Asia today with New Zealand’s Q4 2-year inflation expectation the only item on tap. Things pick up in Europe with Swiss trade data, Sweden’s unemployment, Norway’s Q3 GDP numbers and UK public finances. We have speeches from ECB’s Costa, Weidmann and Nowotny scheduled along with BOE’s Miles. Canada’s retail sales kick off the North American session with the first revision to US Q3 GDP data, Richmond Fed manufacturing index and the minutes of the last FOMC meeting to follow. We also have a late release of Euro-zone consumer confidence on tap.

2011-11-21T08:30:00.001+08:00

Daily Trading Stance - Asia Nov 21 (Click link to view)

 A relatively calm session into the weekend for the EUR and Euro-zone with an early short squeeze/ position squaring taking the EUR higher only to reverse back to mid-range on talk Germany considering more orderly EU defaults and chatter Russia had no plans to buy EFSF debt.
 US budget Super-Committee not yet reached an agreement on budget cuts leading to a slight risk-off start to the week.
 Spain’s Conservatives oust ruling Socialist Party in weekend election, but widely expected

A steady start to a holiday-impacted week

2011-11-21T07:43:00.001+08:00

The EUR looked to be heading into the weekend on a calmer footing with some short-covering the order of the day during the European session. SMP aggressive bond buying continued giving the pair support though reports that Germany was considering more orderly Euro-zone defaults and talk Russia had no plans to buy EFSF debt took some of the shine off the rally and we closed mid-range. Oil prices slid further pushing commodity currencies lower with the CRB commodity Index falling to a fresh weekly low.

The NY session was also relatively tight ranged once Europe left for the weekend with no US data to impact activity. US stocks were mixed in a choppy session with the DJIA finishing up 0.22%, S&P down 0.04% and the Nasdaq down 0.6%. We saw heightened concerns that the US budget Super-Committee was struggling to reach an agreement on at least $1.2 tln of federal budget savings before Wednesday’s deadline.

This morning’s activity has been quite orderly with a slight risk-off feel to activity as no developments appear to be coming on the Super-Committee’s budget talks, suggesting automatic budget cuts might be upon us. Elsewhere, Spain’s People’s Party look to be heading for victory in the weekend Spanish election, ousting the ruling Socialist Party, in a result that is widely expected. Today’s economic data releases kick off with Japan’s merchandise trade data followed by final Q3 GDP data for Singapore. UK Rightmove house prices follow with Japan’s leading/coincident indicators completing the picture.
In Europe we have Swiss money supply and Euro-zone current account on tap while North America can expect Canada’s wholesale sales, US Chicago Fed Activity Index and existing home sales. Fed’s Lockhart is scheduled for a late speech on the economy.

2011-11-18T08:48:00.001+08:00

Daily Trading Stance - Asia Nov 18 (Click link to view)

 Another whippy session for the EUR with the currency closing back where it opened. Early strength hit by weak Spanish and French auctions and further rumblings within the Euro-zone
 US data mostly maintaining recent trend of better performance – weekly jobless claims a lows seen in April, housing starts better than feared and building permits firmer. Philly Fed a disappointment with a dip to 3.6 from 8.7
 No data for Asia to get its teeth into so expect range trading, most likely with a risk-off theme

EU debt yields and funding still in the spotlight; EUR ranging

2011-11-18T08:02:00.000+08:00

We saw another mixed session for Europe and the single currency overnight with European yields firmer initially before reversing back to flat on the day. The Spanish auction was disappointing, only €3.56 bln of the €4 bln subscribed, while the French auction produced a higher yield. French spreads over Germany widened initially before retreating back to flat. The ECB were reportedly heavy buyers of Italian and Spanish bonds with the former’s 10-year yield easing back to 6.8%. The currency firmed to 1.3540 initially but succumbed to selling pressure in the NY session as Fitch released another report detailed US banks’ exposure to EU debt. New Italian PM Monti won the Senate confidence vote but this had little impact. Commodity currencies suffered as crude oil retreated back below $100 p/barrel after yesterday’s spike with the AUD sliding below parity for the first time since October 12.

US data continued to surprise to the upside with weekly jobless claims falling to their lowest level since April (388k) though a mild upward revision of 3k to last week’s data took some of the shine off. Housing starts were not as weak as expected (-0.3% vs. -7.3%) while building permits were firmer (+10.9% m/m). The weekly Bloomberg consumer comfort index showed mild improvement from last week (from -51.6 to -50.0) and the economic expectations index rose to -32 from -45. The other fly in the ointment was a weak Philadelphia Fed index which hit 3.6 from 8.7 in October. Wall St was in the red again with the S&P now perilously close to 1,200 support.

Data releases are thin on the ground in Asia with Japan’s department store sales the only item. Europe is also quiet on the data front with German producer prices the only release scheduled with speeches from a number of ECB members – Draghi, Gonzalez-Paramo, Bini Smaghi and Weidmann all scheduled. The North American session features CPI from Canada and leading indicators from both the US and Canada.

2011-11-17T09:18:00.001+08:00

Daily Trading Stance - Asia Nov 17 (Click link to view)

 EUR’s corrective rally stalled as Moody’s downgraded some German Landesbanks, Italian bank funding hit the spotlight
 Fitch warned US bank ratings at risk from EU contagion
 US data continuing recent trend of beating forecasts

European woes continue; EUR's corrective rally stalls

2011-11-17T08:10:00.000+08:00

The EUR had another rollercoaster ride overnight with an early short squeeze in EURUSD encountering consistent selling pressure and soon reversing, with increased SMP bond buying prompting the rally. However, Moody’s downgrades of some Landesbanks, chat that Italian banks had asked ECB for more access to funding (European banks’ funding issues was also highlighted by a WSJ article on the high levels of Euro-dollar basis swaps) and comments from the Dutch FinMin that all scenarios are being considered (including a reduction in the bloc’s size) gave reason to sell while the risk-off mood was cemented by Fitch’s warning that US bank ratings could be affected by Euro-zone contagion.

While the EUR ended weak, GBP was even weaker with the latest unemployment data showing jobless at highest since 1994 and the Bank of England’s quarterly inflation report extremely dovish. Growth forecasts were slashed for 2012 and 2013, the former seen at sub-1% and the latter at 1%. The chances of another recession were put at 1 in 3 and the prospect of additional QE measures increased.

In contrast, data out of the US maintained their recent trend of better performance with industrial production rebounding strongly to +0.7% from a revised -0.1% last with capacity utilization also firmer at 77.8%. Inflation data was more-or-less in line with forecasts with core CPI up 0.1% m/m but headline prices falling 0.1% as a result of lower energy costs (first drop since June). Note crude prices jumped above $100 p/b on technical news regarding supply and the firm US data. Fed’s Lacker said US growth should reach 2.5-3.5% and the Fed should be withdrawing, not considering adding, monetary stimulus.

Today’s Asian session features Singapore’s non-oil domestic exports. Europe sees Sweden’s unemployment rate and UK retail sales while the North American session features Canada’s international securities transactions, US building permits, housing starts, weekly jobless claims and the Philadelphia Fed Index. In addition to the data releases, we have a Spanish bond auction today and a confidence vote for the newly-formed Italian government

2011-11-16T08:31:00.001+08:00

Daily Trading Stance - Asia Nov 16 (Click link to view)

 EUR again under pressure as EU debt yields under the spotlight. 10-year Italy yields back above 7%, Austria suffers downgrade rumour, Spanish auction disappointing and France spreads over Germany at cycle highs for the crisis.
 US data strong – retail sales +0.5%, empire manufacturing in a healthy rebound from last month’s disaster, headline and core PPI lower m/m
 US dollar index approaching 5-week highs
 BOJ meeting announcement today – not expecting any change but downgrade to economic outlook, comment on JPY strength

EUR continues to slide despite a strong batch of US data

2011-11-16T07:57:00.000+08:00

The EUR continued to slide overnight with EU debt yields again under the spotlight. First hit were Austrian yields amid talk of an imminent downgrade, though later acknowledged that an upcoming Moody’s visit was scheduled and routine, while Italian 10-year yields popped above 7% again on rumours of a further downgrade, despite more SMP buying. Core EU yields were not spared either with French spreads over Germany at fresh crisis highs while Dutch yields started to edge higher. ZEW surveys for both Germany and Euro-zone added further pressure as forward-looking readings showed further deterioration. Elsewhere, BOE’s King commented in his letter to Chancellor Osbourne that inflation would fall sharply over the next 6 months to hit its 2% target by end-2012 as the deteriorating global outlook weighs on the economy (October CPI below forecast at 5.0% y/y).

Over in the US, retail sales came in above expectations, rising 0.5% (with some suggesting new iPhone sales responsible) while the empire manufacturing survey showed a healthy rebound from last month’s disastrous -8.48 reading. The index rose to +0.61 and beat market forecasts of an improvement to just -2.0. Producer prices showed short-term benign tendencies with headline and core readings both below forecast (but note core y/y readings rose to 2.8%.

Fed speakers outlined their differing views on stimulus/the economy with Fisher saying the Fed had done “too much” to stimulate the economy while Evans repeated his stance that more stimulus was needed to bring down unemployment. Despite the slew of strong data, Wall St managed only small gains on the day after a heavy start with Euro-zone issues continuing to have a dampening effect. DJIA managed to post 0.14% gains, S&P 0.48% and the Nasdaq 1.09%.

Asian data is again mostly second-tier again with Australia’s DEWR skilled vacancies, wage cost index and Japan housing starts the only items on the agenda. The BOJ concludes its 2-day meeting with the announcement expected around noon (Singapore time). Expect no change in policy, a downgrade to the economic outlook and comments about JPY strength.

The European session features Sweden’s industry capacity, UK unemployment data and the BOE’s quarterly inflation report (expect dovish content)along with Euro-zone CPI. The US session has a busy schedule with CPI, TIC flows, industrial production/capacity utilization and the NAHB housing market index. Fed speakers include Dahlgren, Lacker and Rosengren.

2011-11-15T08:19:00.001+08:00

Daily Trading Stance - Asia Nov 15 (Click link to view)

 Positive mood from weekend developments in Italy/Greece did not last long. Italian bond auction sees highest yield since joined Euro-zone, spin off effect into French, Belgian and Spanish yields.
 Warren Buffett says no interest in EU sovereign debt or Euro-zone bank investments
 RBA minutes from last meeting (25bp cut) the highlight for Asia today along with Singapore retail sales
 Fed’s Evans speaks on a possible dual mandate for the Fed (including nominal GDP targeting) – could be a market mover
 US data perks up with PPI, retail sales, empire manufacturing and business inventories all on tap

EUR's positive mood dissipates quickly and we revert back to ranges

2011-11-15T07:44:00.000+08:00

Positive sentiment on the back of developments in Greece/Italy over the weekend soon wore off as Monday’s European session got under way and we saw a slow and steady retracement of the EURUSD’s gains. Italy’s bond auction produced a yield that was the highest since they joined the Euro-zone and we saw a spill-off effect into French, Belgian and Spanish yields. On the political front, Angela Merkel’s CDU party voted to allow exits from the Euro-zone (though the legal aspects still need amendment) while Merkel herself commented that if the EUR fails then Europe fails. Noted investor Warren Buffett said he has no interest in European sovereign debt or EU bank investments.

There were no US data releases to impact the North American session but we saw a snap back in UST after the market holiday on Friday with 10-year yields easing off to just above 2%. Wall St had a negative day as financials led all sectors lower with the DJIA sliding 0.61%, the S&P 0.96% and the Nasdaq 0.8%.

Asia has another quiet data session though things pick up across in the US. RBA minutes of the November meeting will be the highlight after the 25bp rate cut with Singapore retail sales, Australia new vehicle sales and Tokyo condominium sales the other items on the calendar. The European session features German and Euro-zone GDP, Norway’s trade balance, UK CPI/RPI and the ZEW surveys from both Germany and the Euro-zone. The US session kicks off with a keynote speech from Fed’s Evans on the topic of a Fed dual mandate (nominal GDP targeting included) while on the data front we can expect US PPI, retail sales, empire manufacturing and business inventories. Other speakers include Bullard, Williams and Fisher.

2011-11-11T08:35:00.000+08:00

Daily Trading Stance - Asia Nov 11 (Click link to view)

 EUR recovers as Italian yields ease following a better than expected bond auction, Greece announces Papademos as the new Greek PM and rumours of an emergency ECB meeting did the rounds
 French yields hit record highs over Germany as an erroneous ratings alert from S&P emerged, subsequently retracted and affirmed as AAA
 US data better than expected – trade deficit narrows, weekly jobless claims at 390k and weekly Bloomberg consumer comfort index improving to -51.6 from -53.2
 WSJ suggests Japan may be doing "stealth" intervention in USDJPY as it hovers near 78

EUR rebounds as Italy concerns ease (slightly!), new Greek PM announced

2011-11-11T07:44:00.001+08:00

The EUR enjoyed some respite from the recent spate of weakness, but not before testing sub-1.35 versus the dollar for the first time in a month initially. A better than expected Italian bond auction, ECB bond buying, rumours of an emergency ECB meeting and Greece announcing that Papademos would be the new interim PM through till February 19 were all suggested as reasons for the squeeze up through 1.3650. The EUR did endure a harrowing time however following an erroneous S&P ratings alert on France, only for it to be retracted and replaced with an affirmation of its AAA rating. It was enough to push French 10-year bond yields to a record high spread over Germany’s.

Elsewhere, the Bank of England made no changes to rates or asset purchase program (as expected) while French and Italian industrial production numbers gave further indication that the Euro-zone economy is struggling. Firmer oil prices led the CAD higher but the other commodity currency AUD lagged behind as Australian Treasurer Swan commented that the country had room to ease fiscal and monetary policy if needed.

US data was on the strong side with weekly jobless claims falling another 10k to 390k with the 4-week moving average now at 400k. The US trade deficit narrowed to $43.1 bln from a revised $44.9 bln last month while the weekly Bloomberg consumer comfort index improved to -51.6 from -53.2. The US 30-year bond auction was less-than-compelling with the yield for the $16 bln on offer rising to 3.199% from 3.12% last with the lowest indirect bids since August.

An almost barren data slate in Asia is likely to ensure another consolidative, range-bound session today. Data is Japan-centric with tertiary industry index and domestic corporate goods prices the major items scheduled. Heading into Europe and we can expect Sweden’s unemployment rate and UK PPI input/output with speeches from ECB’s Gonzalez-Paramo, Kranjec and Stark. US data is limited to provisional Michigan confidence data for Novemeber accompanied by speeches from Fed’s Yellen, Evans and Williams.

Have a great weekend. Watch out for 11:11 on 11/11/11.

2011-11-10T08:21:00.001+08:00

Daily Trading Stance - Asia Nov 10 (Click link to view)

 Perfect storm for EUR weakness overnight – Italy debt yields cross 7% mark (unsustainable level for Italy to service), LCH Clearnet hikes margin levels on Italian debt, Greek coalition negotiations collapse, ECB refuses to take on role of lender of last resort and Germany’s Handelsblatt newspaper suggests Germany and France exploring concept of a smaller Euro-zone.
 EUR down 3 big figs versus dollar, risk definitely off!
 Oz employment data and China trade numbers highlight for Asian session. Europe will await more headlines!

EUR tumbles as Italy debt yields cross the 7% mark

2011-11-10T07:46:00.000+08:00

A perfect storm brewed for a heft EUR sell-off overnight as Italian debt yields spiraled out of control, breaching the 7% mark and calling into question the sustainability of Italy being able to roll over its debt a such high levels. LCH Clearnet aggressively hiked margins on Italian debt and, combined with a breakdown on Greece’s (remember them?) coalition negotiations, EUR tumbled 3 big figures versus the greenback during the overnight session. Meanwhile the ECB continues to refuse to adopt the role of lender of last resort (as per new president Draghi) and Germany’s Handelsblatt is suggesting Germany and France are exploring the concept of a smaller Euro-zone.

Elsewhere, GBP was less affected by the risk-off trade despite a weak UK trade performance in September (deficit widened to £9.8 bln from £8.6 bln) despite remaining quite weak. EURCHF softened as the SNB failed to announce any new “target” for the strong CHF despite viewing purchasing power parity at 1.35-1.40 for the pair. Commodity currencies were not spared the pressure with NZD also slumping after RBNZ’s Bollard waned to downside risks to the economy.

US data flows were minor with wholesale inventories falling 0.1% m/m in September but the news was engulfed completely by the woes out of Europe. Wall St tumbled, having its worst day since mid-August as the DJIA slumped 3.2%, S&P 3.67% and the Nasdaq 3.88%.

EURUSD may take a breather in Asia this morning as we near a reported option barrier at 1.35 but overall the pressure must remain unless some striking news is announced. On the data front we have Australia’s unemployment data and China trade numbers on tap along with Japan’s machine orders, machine tool orders and consumer confidence. Europe will see CPI data from Germany, Sweden and Norway and PPI from the latter too. The Bank of England meets to decide on rates but is widely expected to keep everything unchanged after last month’s increase in its asset purchase program. North America (note Veteran’s Day tomorrow but most markets remain open) will feature Canada’s trade data and US import prices, trade balance and weekly jobless claims and Bloomberg consumer comfort index. Fed speakers include Lockhart and Evans.

2011-11-09T08:20:00.001+08:00

Daily Trading Stance - Asia Nov 9 (Click link to view)

 Berlusconi survives the budget/confidence vote but without an absolute majority. Later stated that he will step down once austerity measures are implemented. EUR regains the 1.38 handle versus dollar.
 UK given a lift following strong NIESR GDP estimate for October but IP for September a tad on the weak side. Gains tempered by BOE meeting tomorrow (more QE, gloomy economic outlook?).
 China data for October will be main economic event for Asia – CPI, PPI, IP, retail sales and fixed asset investment all due

EUR rebounds as Berlusconi survives vote but says will step down later

2011-11-09T07:41:00.001+08:00

All eyes were on the Italian budget vote in Europe yesterday which was also seen as a quasi confidence vote as well. Berlusconi survived the vote, but without an absolute majority yet this was enough to pull EURUSD back above the 1.38 level with later news that he would resign after the austerity measures were implemented helping to cement a broader risk-on trading theme. That said, EURUSD remained within the established 1.3650-1.3850 parameters and showing no real inclination to break out in either direction. GBP was given a late boost with a firm +0.5% NIESR GDP estimate for October though other data (IP for September) was less than convincing.

Not much to report on the North American session with NFIB small business optimism close to expectations (90.2 from 88.9 last) though the IBD/TIPP economic optimism reading showed improvement from October but a below forecast 40.6. Fed speakers were on the wires with Kocherlakota commenting that unemployment was too high and the Fed had tools to ease further if needed, adding that a third round of quantitative easing was possible if the risk of deflation increases. Wall St had a positive day as the European events unfolded with the DJIA rallying 0.84%, S&P up 1.17% and the Nasdaq +1.2%.

Today’s Asian data calendar is more heavily populated with the slew of Chinese data for October the main event. CPI, PPI, industrial production, retail sales and fixed asset investment are all slated for release along with Japan’s current account balance, bank lending and trade balance (BOP basis). From Australia we have just had a surprisingly spectacular 6.3% m/m rebound in consumer confidence (as measured by Westpac) and we have Australian home/investment loans to come. UK BRC shop price index completes the Asian session.

From Europe we can expect the minutes of the last Riksbank meeting, Sweden’s industrial production numbers and the UK trade balance while North America features Canada’s new house prices and US wholesale inventories. Fed’s Bernanke is scheduled to speak at a conference on small businesses.

2011-11-08T08:32:00.001+08:00

Daily Trading Stance - Asia Nov 8 (Click link to view)

 A volatile session for the EUR overnight as attention switches from Greece to Italy, though the currency reverted back to opening levels by the close
 Berlusconi appears to be hanging on by the skin of his teeth – vote on latest budget due today
 Slow on the data front in Asia with Oz trade data the major feature

EUR volatile is Italy now becomes the focus of attention

2011-11-08T07:50:00.001+08:00

With attention switching from Greece to Italy yesterday, rising Italian yields and Berlusconi’s uncertain future pressured the EUR early in the session but losses were limited to just below 1.37 versus the dollar. Rumours that he was to resign plus data showing the ECB had bought more periphery debt than expected provided the lift back to 1.38 before settling barely changed on the day. CHF was also in the news with suspicions the SNB would review its EURCHF floor higher with a negative year-on-year CPI number giving the pair an extra lift. Note SNB’s Hildebrand has a number of speeches scheduled for this week.

Wall St traded according to EU headlines but managed to score gains on the day. On the data front, the only release was US consumer credit which rebounded from August’s $9.68 bln decline to rise $7.38 bln in September.

It is a relatively quiet data day in Asia today with UK BRC like-for-like sales and RICS house price balance quickly followed by Australian trade data and NAB business conditions/confidence. In Europe we can expect Swiss consumer confidence, German trade data and UK industrial production while the US session features small business optimism, economic optimism and JOLT’s job openings. On the political front, Italy votes on its latest budget (almost a confidence vote for the government) while France votes on its latest austerity measures (tax hike, spending cuts worth $9.6 bln) to preserve its AAA rating.

2011-11-02T08:24:00.001+08:00

Daily Trading Stance - Asia Nov 2 (Click link to view)

 Greek PM’s surprise announcement of a referendum on the latest EU loan package (was a surprise to some of his Cabinet too!!) kept the EUR under pressure. Concerns of a surprise snap election increased after PM Papandreou announced a surprise cabinet meeting late y’day.
 GBP gained a tad from the anti-EUR positioning but a very weak PMI tempered gains. First estimate of Q3 GDP beat forecasts with +0.5% q/q
 US ISM data weak on the headline but components more encouraging

Greece woes crush the EUR yet again

2011-11-02T07:52:00.000+08:00

Yesterday’s announcement on a Greek referendum on the latest EU loan package has heightened concerns about Greece and its government, with signs a number of ruling party members are abandoning ship leaving PM Papandreou without any majority. This increased chatter of a possible snap election (as early as yesterday/today, especially after PM Papandreou called for an emergency cabinet meeting late yesterday) and the EUR was under pressure for almost the entire session. To compound the Greek risk-off input, PMI/ISM data from across the globe was predominantly on the soft side with Sweden the only European country to beat forecasts.

GBP gained a small advantage with all the anti-EUR positioning though a very weak PMI reading (47.4) tempered the gains. The first estimate of Q3 GDP beat forecasts with a +0.5% q/q increase versus 0.3% but this was overshadowed by the Greece developments. On the US front, the manufacturing ISM dipped to 50.8 from 51.6 (52.0 forecast) though the components of the index suggested the headline appeared more pessimistic. New orders were firm, registering the first 50+ reading in 4 months while inventories declined. The rout on Wall St continued into a second day with the S&P now having given back all of last week’s gains in 2 days. European issues and the fallout from MF Global’s filing for bankruptcy kept the financial sector under severe pressure. DJIA down 2.48%, S&P down 2.79% and the Nasdaq -2.89%.

Today’s Asian calendar is quiet compared to yesterday with Australia’s building approvals and Japan’s monetary base the only items on tap. Europe is only a bit busier with both German and Norwegian unemployment data, manufacturing PMI form both the EU and Germany along with the construction PMI form the UK. The US session starts the run-up into Friday’s non-farm payroll numbers with the release of Challenger job cuts and the ADP employment change. The announcement from the FOMC will be released early tomorrow morning Asian time.

2011-11-01T08:35:00.001+08:00

Daily Trading Stance - Asia Nov 01 (Click link to view)

 Once the dust had settled following the Japanese intervention, attention switched to the EUR and a number of negative inputs push the single currency back to Thursday’s levels versus the dollar – Greek referendum on latest EU loan, Italy debt spreads back a pre-plan levels and weak EU data.
 Wall St deep in red but still best month in 20 years
 US data mixed – Chicago PMI soft but Dallas Fed rebounds after last month’s slump
 RBA announcement and China PMI data the highlight for Asia and all eyes on Japan for more intervention (sporadic bids seen overnight in USDJPY)

EUR suffers on talk of Greek referendum on latest EU loan

2011-11-01T07:40:00.000+08:00

In the aftermath of the Japanese intervention yesterday, the spotlight quickly switched to Europe as the session unfolded with the EUR suffering heavy losses in the later stages. Weak European data (German retail sales below forecast, Euro-zone unemployment at 10.2% hit its highest level ever in September), Italian debt spreads still above pre-agreement levels and news that Greek PM has called for a referendum on the new “EU loan agreement” piled on the pressure and sent the single currency down to its lowest level since last Thursday. On a positive note, Moody’s gave an upbeat assessment of Sweden’s credit outlook. Japanese bids we spotted sporadically in USDJPY and all eyes will now be on the Tokyo open to see if the authorities repeat their performance from yesterday.

On the US front, the Chicago October PMI was soft at 58.4 from 60.4 (59.0 expected) but the Dallas Fed manufacturing activity showed a healthy rebound from September’s slump, coming in at +2.3 from -14.4 (-5.0 expected). Wall St finished its best month in 20 years on a downbeat note as fresh concerns about Europe and news of MF Global filing for bankruptcy hit sentiment. The DJIA slumped 2.26%, the S&P down 2.47% (now about flat for the year) and the Nasdaq -1.93%.

The start of a new month brings the usual wave of PMI data. Australia’s manufacturing PMI rebounded to 47.4 from a lowly 42.3 and now we await those from China (both official and HSBC equivalent) along with Australia new home sales and house price index and the rate announcement from the RBA (market evenly split between a cut and unchanged, forward market already pricing in a 25bp cut).

In Europe, apart from the PMI fest we have UK Nationwide house prices and Q3 GDP while the US session features construction spending, ISM manufacturing and ISM prices paid.

2011-10-31T08:25:00.001+08:00

Daily Trading Stance - Asia Oct 31 (Click link to view)

 A broader session of consolidation Friday for the EUR after Thursday’s post-Greek-deal rally. A few negatives creeping in though – Fitch says 50% haircut would be default event, Italy bond auction poorly received (yields back at pre-deal levels), Ireland downgrades 2011 growth forecasts by "at least"1%.
 US data mixed – personal income falls but spending constant – final Michigan confidence higher but Milwaukee NAPM only marginal improvement.
 USDJPY spiked lower at today’s open on stop/loss hunt but rebound strong
 Europe pushed back clocks over weekend so European open one hour later than last week.

EUR's consolidation continues despite slightly negative news flows

2011-10-31T07:50:00.000+08:00

The EUR’s consolidation continued in Friday’s overnight session though it struggled to regain the 1.42 handle versus the US dollar in relatively quiet dealings. A slight negative bias emerged after Fitch commented that a 50% Greek haircut would be a default event though meanwhile S&P affirmed the EFSF’s AAA rating. On the data front, Swiss leading indicators fell to their lowest since August 2009 while Swedish retail sales came in well below forecast and confidence surveys also weak. USDJPY traded below 76.0 for the entire session, the first time this cycle.

On the US data front, personal income decreased yet personal spending remained static (not the best of scenarios). On the other hand, Michigan confidence saw a strong upward revision in the final reading for October, up to 60.9 from 57.5, but the NAPM for Milwaukee showed a marginal improvement to 55.5 from 55.4. The mixed data left wall St in limbo with the DJIA gaining 0.18%, S&P up 0.04% but the Nasdaq lost 0.05%.

This morning’s start was relatively orderly though a stop hunt in USDJPY saw the pair trade down to 75.38 though the rebound was sharp and back to opening levels. Today’s data calendar sees UK Lloyds business barometer and Hometrack housing survey, Australia’s private sector credit and Singapore’s money supply and unemployment data while finishing with Japan’s construction orders and housing starts. Europe sees German retail sales, Swedish wages, Norway retail sales, UK consumer credit and money supply along with Euro-zone CPI and unemployment. From North America we see Canada’s industrial product/raw material prices and GDP for August along with Chicago PMI and the Dallas Fed manufacturing.
Activity.

Remember the UK and UK pushed back the clocks at the weekend so European openings will be one hour later than last week.

2011-10-28T08:28:00.001+08:00

Daily Trading Stance - Asia Oct 28 (Click link to view)

 The relief rally after the Greek debt announcement yesterday extended and accelerated overnight with the EUR rallying to 7-month high.
 USD index weaker across the board with better risk appetite – now below 100- and 200-day MA
 Slow data day in Asia now that Japan data published
 Heading into the weekend with a more positive outlook on life/markets for a change!

EUR rallies to 7-month highs after Greek debt solution

2011-10-28T07:51:00.000+08:00

The relief rally that started after the Greek debt announcement yesterday extended and accelerated as the day wore on with EURUSD rallying to a 7-month high. Part driven by short-covering of excessive EUR shorts and part buoyed by at least some positive developments out of Europe, the pair broke through numerous resistance levels, including the 200-day moving average. The USD was generally weak across the board as risk appetite rallied with the USD index falling through both 100- and 200-day moving averages and USDJPY sliding to new post-war lows. GBP underperformed following more dovish comments from BOE’s Fisher saying there was a high chance of another UK recession.

On the data front, US Q3 GDP was bang in line with forecasts and a nice step up from the 1.3% recorded in Q2 with the details suggesting an even stronger performance than the headline. Initial jobless claims continue to hover around the 400k mark (402k actual from 404k last) while pending home sales were weaker than the previous month and below forecast. The weekly Bloomberg consumer comfort reading was another blight on an otherwise healthy data calendar with another dip to -51.1 from -48.4 last. Despite this, Wall St was encouraged by developments out of Europe and positive data and rallied strongly – DJIA up 2.86%, S&P up 3.43% and the Nasdaq up 3.32%.

Japanese data again dominates today’s Asian calendar with CPI already reported (September national CPI flat y/y, Tokyo reading for October at -0.5% y/y) and industrial production for September is due as we got o press. China’s business conditions survey is the only release scheduled today. In Europe, we can expect Sweden’s confidence surveys and retail sales, Norway’s unemployment rate and Swiss leading indicators. The US session sees personal income/spending, PCE deflator and the final Michigan confidence reading for October.

Have a great weekend.

2011-10-27T08:30:00.001+08:00

Daily Trading Stance - Asia Oct 27 (Click link to view)

 EU summit headlines dominated trading overnight with resultant volatility. Early EUR strength from Germany approving EFSF leverage negated by banks rejecting Greek bond loss plan. EFSF leverage 4 times to €1 tln
 US data better than f/c – US durable goods ex-transportation up 1.7%, new home sales up 5.7% m/m
 BOJ meeting the highlight for Asia today with prospect of increase to asset purchase programme (and some intervention?)
 US Q3 GDP this evening

EU summit headlines drive EUR volatility again

2011-10-27T07:52:00.000+08:00

Developments surrounding the EU summit provided the input for volatile EUR moves overnight though by the end of the overnight session the single currency was almost back to earlier levels. News that Germany’s Bundestag had approved the EFSF leverage plan gave the EUR a lift to 7-week highs only for it to be trounced shortly after as it emerged that talks with banks on Greek haircuts were deadlocked (subsequently banks said no to the deal as it stood, though “open to a voluntary pact”). Headlines that the EFSF was to be leveraged 4 times to €1 tln reversed the decline to finish back where it started.

Elsewhere, GBP struggled for traction after a disappointing CBI trends survey (total orders at -18 is the lowest in almost one year) while AUD suffered under heightened RBA easing talk following yesterday’s below forecast CPI data. EURCHF hit its lowest level in almost 3 months as it broke below the 1.22 level but talk of SNB buying lifted the pair back higher. USDJPY trickled to new lows but more comments from Japanese FinMin Azumi brought us back above 76.0.

US data was generally better than forecast with durable goods orders down a small-than-expected 0.8% with the ex-transportation figure a more healthy +1.7%. New home sales were also firmer with a 5.7% m/m increase in September. Wall St was encouraged by the broader outline of the EU debt plan and better data to post modest gains. DJIA rallied 1.39%, S&P 1.05% and the Nasdaq 0.46%.

Earlier this morning the RBNZ left rates unchanged at 2.5%, as expected, due to the global uncertainty but maintained its tightening bias for when conditions would allow. The NZD rallied almost one big figure in the aftermath and now stands well above the 200-day moving average. AUD was also dragged higher in its wake.

Today’s data centres around Japan with retail trade, large retailers’ sales and weekly portfolio flows all on tap followed by China’s industrial profits. We also have the BOJ meeting with a heightened chance of additional asset purchases (and some suspecting some unilateral JPY intervention). The European session features Sweden’s household lending and the rate announcement from the Riksbank (no change from current 2.0%) along with CPI data from the numerous German states. Euro-zone confidence indicators and M3 money supply complete the picture with UK’s CBI reported sales survey also scheduled. The US session features the first Q3 GDP estimate, weekly jobless claims and consumer comfort, pending home sales and the Kansas City Fed manufacturing activity index.

2011-10-25T08:24:00.001+08:00

Daily Trading Stance - Asia Oct 25 (Click link to view)

 PMIs were the main driver of sentiment overnight with the China flash HSBC manufacturing reading giving the EUR an early lift, only to be dashed by weak preliminary readings from both Germany and the Euro-zone
 US Chicago Fed activity index below f/c and previous month revised lower
 Nevertheless, Wall St rallied close to key technical resistance levels in DJIA and S&P
 Slow data day in Asia (SI industrial production o the only main release) but Europe busier
 Bank of Canada not expected to move rates

A tale of two PMIs whips the EUR about

2011-10-25T07:52:00.000+08:00

Differing outcomes from PMI readings in the East and West were the main drivers of sentiment yesterday. While the flash HSBC China manufacturing PMI provided a positive boost with a move back above the 50 threshold to 51.1 (though last month its predictive powers of the final number were useless), combined with what was seen as positive developments at the weekend EU summit, pulled the EUR up t 6 ½ week highs versus the USD. It was a different story in Europe however with the German PMI sliding to 48.9 (lowest since July 2009) and the Euro-zone reading sliding 1.2 points to 47.3 (note still preliminary readings). The service sector was mixed with a rebound in Germany to 52.1 but slippage in the Euro-zone to 47.3. This resulted in a whippy session overall for the EUR though still confined to recognized ranges.

On the US data front, the Chicago Fed activity index showed a slight improvement to -0.22 (but below the -0.10 expected) but a downward revision to August’s number to -0.59 from -0.43 negated any positives. However, Wall St was encouraged by strong earnings announcements (Caterpillar) and hopes over Europe and rallied to within spitting distance of key technical resistance levels (1,257 in S&P, 11,967 in DJIA) with gains of 0.89% for the DJIA, 1.29% for the S&P and 2.35% for the Nasdaq.

Fed’s Dudley was on the wires saying the Fed could do another round of QE while bemoaning the still high level of mortgage rates. On the homeowner note, the FHFA announced updates and easing of certain restrictions in its Housing Affordable Refinance Program (HARP) in order for underwater borrowers access to refinancing.

Today’s Asian data calendar is quiet with Japan small business confidence and Singapore industrial production the only items on tap. Europe sees Swiss consumption, Swedish producer prices and UK current account data. BOE’s King and Bean face questions on QE in front of the Treasury Committee. Canada’s Bank of Canada rate meeting kicks off the North American session though no changes are expected. Retail sales are released at the same time. From a US perspective, S&P CaseShiller house prices are scheduled along with consumer confidence, FHFA’s house price index and Richmond Fed manufacturing index.

2011-10-24T08:22:00.001+08:00

Daily Trading Stance - Asia Oct 24 (Click link to view)

 The hopes for some clarity from the weekend EU summit failed to materialize and now we have to wait until Wednesday for another convened meeting. EUR firmer on Friday and holding up quite well this morning despite the non-event
 USDJPY hit new record lows sub-76.0 on Friday during NY session but rumours of BOJ checking rates pulled back higher. This morning FinMin Azumi said ready to take "decisive action" on excessive speculation.

No news from EU summit yet EUR holding up well

2011-10-24T07:36:00.001+08:00

The market was looking for some clarity from the weekend EU summit on a number of fronts, but in the end it appears we have to wait until the next summit (likely Wednesday) before any details emerge. There was little news on the Greece debt situation, European bank re-capitalization plans seem to be gravitating towards a €100 bln figure (at the low end of market expectations) while the enhanced EFSF with leverage proposals seem to be drifting towards some sort of insurance plan for new issues with backstop liquidity coming from a special purpose vehicle with funding from external sources. But, as mentioned above, details are very scant at the moment. EUR has remained stubbornly high since the Asian open with only a slow drift lower witnessed during trading so far.

With all eyes on the EUR and the EU summit on Friday, it almost went unnoticed that USDJPY dipped to new record lows during the NY session though rumours of the bank of Japan checking rates soon pulled the pair back above 76.0 again. Data highlights focused on Canada’s inflation rate which came in at +3.2% y/y with the BOC’s core inflation at +2.2% y/y, above the Bank’s 2% target rate and thus knocking back ideas of an easier bias at tomorrow’s rate meeting. CAD firmed accordingly, also helped by firmer oil prices, with other commodity currencies helped by firmer commodity prices and broader risk-on sentiment into the weekend.

A calm start to the week so far in Asia with data releases also kept to a minimum. Japan’s merchandise trade balance is scheduled along with Australian producer prices, the flash HSBC manufacturing PMI (a mover last month) and Singapore CPI. The European session features PMI data from both Germany and the EU together with Euro-zone industrial new orders and a speech from BOE’s Tucker. We see the Chicago Fed activity index during the US session while speeches come from Fed’s Dudley and Fisher.

2011-10-21T08:15:00.001+08:00

Daily Trading Stance - Asia Oct 21 (Click link to view)

 EUR blown around by EU summit headlines/rumours last 24 hours with bulls and bears invariably caught in stops.
 US data generally better – Weekly jobless claims revised up by 5k but this week’s improved by 6k; Philadelphia Fed surprised with a strong rebound to +8.7 from -17.5. Existing home sales slightly below f/c
 Very little data in Asia today as we head into the summit and everyone headline-watching

EUR blown around by EU summit headlines

2011-10-21T07:45:00.000+08:00

It was a hectic, choppy 24 hours for the EUR as markets traded from headline to headline, rumour to rumour. We saw early strength as an EU source said the next tranche of Greek aid was not in doubt and details of EFSF guidelines were seen as a positive but this soon changed as market chatter suggested Germany was considering delaying the EU summit. As it turns out, the summit is going ahead though German and French leaders have urged another meeting on October 26. UK retail sales were firmer than expected though tempered somewhat by a downward revision to the previous month’s data and GBP basically remained sidelined at the whim of EUR moves.

In all the EUR volatility, US data releases almost went unnoticed, though generally better than forecast. Weekly jobless claims were net flat with a 5k increase to last week’s data countered by a 6k drop to 403k this week. Leading indicators were unchanged from a month ago, up 0.2%, but the Philadelphia Fed index was a surprise with a strong rebound to +8.7 from -17.5 last (-9.4 expected). Existing home sales were the only blot on the landscape with a larger m/m fall than expected (-3.0%) and breaking the recent run of good news from the housing sector.

We have another light data session in Asia today and, given the huge volatility we have seen this week a tired market will likely coast into the weekend, subject to an additional news headlines of course! Australia’s import prices and a flash China business sentiment survey are the only items on the agenda along with New Zealand’s credit card spending.

The highlight for Europe will be IFO surveys from Germany with Swiss money supply and UK public finances either side. Canada’s CPI data is the only release scheduled for the North American session as we head towards the weekend EU summit.

2011-10-20T08:25:00.001+08:00

Daily Trading Stance - Asia Oct 20 (Click link to view)

 Doubts over the implementation/viability and legality of the EFSF expansion halted the EUR’s rally overnight. Forecasts of the size of the fund heavily reduced from €2+ tln talked of yesterday while EU bank recapitalization forecasts also well below initial ideas.
 BOE unanimous in QE measures, Norges Bank leaves rates unchanged with current activity below recent forecasts  Greece votes on new austerity measures today – with the country in its second day of national strike
 Another quiet data session for Asia

EU bailout fund talks stall so the EUR retraces lower

2011-10-20T07:51:00.000+08:00

Once again the EUR looked firm in the early part of the overnight session, only to give back those gains in the latter stages as questions arose concerning the implementation/viability/legality of the expanded EFSF bailout package. The latest Mer-kozy meeting produced nothing new (indeed Sarkozy commented that talks had stalled over methods) while commentaries are suggesting the EFSF firepower will be closer to €1 tln rather than the €2+ tln talked about. An FT article also suggested that EU recapitalization would be closer to €80 bln, much lower than current market expectations. As a result, EURUSD stalled in its current rally after chasing stops above 1.3840 and we are still trading in the familiar 1.3650-1.3850 band.

GBP shrugged off dovish BOE minutes with a unanimous decision for further asset purchases while still-high inflation is still regarded as transitory. While on central banks, Norges Banks left rates unchanged (as expected) and commented that current economic activity was slightly below expectations though no deeper slowdown was expected with inflation expected to gradually rise to target levels.

US data was mixed with headline CPI as expected at +0.3% m/m and +3.9% y/y and core CPI slightly below forecast at +01% m/m, +2.0% y/y (in contrast to Tuesday’s surprise jump in PPI). Housing data was positive for the second day in a row with housing starts surprising with a 15.0% m/m increase (3.3% expected). The Fed’s Beige Book indicated that underlying activity was little changed (bit firmer) for the previous month but that uneasiness about the outlook deepened. Some districts however did show some deceleration in activity though spending was up across the country and wage pressures remained subdued.

Today’s Asian data calendar is again quiet with weekly Japan portfolio flows and Australia’s NAB business confidence the only items on the agenda. Europe sees German producer prices, Swiss trade data, Swedish unemployment and UK retail sales on tap while Greece votes on another round on austerity measures (while the country enters its second day of strikes). The North American session kicks off with Canada’s wholesale sales, weekly US jobless claims and consumer comfort index along with leading indicators, Philadelphia Fed index and existing home sales. Fed’s Bullard and Pianalto are also scheduled to speak.

2011-10-19T08:20:00.001+08:00

Daily Trading Stance - Asia Oct 19 (Click link to view)

 Talk of a "new" Franco/German plan to increase EFSF to €2 bln swung risk appetite back to positive after early weakness of EU debt ratings warnings (Moody’s subsequently downgraded Spain 2 notches to A1)
 EU data weak, US data showing small increase in pipeline inflation pressures
 Quiet data session for Asia – market still headline-watching

Talk of the "next" EFSF plan reverses sentiment (again!)

2011-10-19T07:43:00.000+08:00

The risk appetite pendulum swung back and forth during the overnight session, eventually settling on the more positive side of things on news of a France/Germany-led proposed “comprehensive plan” to resolve the EU debt crisis, as reported by the UK’s Guardian newspaper. Initially risk was swooning as Moody’s warned on France’s AAA rating and issued a downbeat assessment of the Spanish economy (subsequently downgraded 2 notches to A1). EU data points were weak with ZEW surveys for Germany and Euro-zone all softening while GBP slid on stagflation fears as CPI jumped to 5.2% in September (highest in 3 years).

On the US front, producer prices were firmer (both headline and core) while TIC data showed net inflows of $57.9 bln (from +$9.1 bln last) though China’s purchases of US Treasuries slowed. A small positive for the housing sector saw the NAHB housing index rise to 18 from 14 (highest since may 2010). Wall St shrugged off weak Goldman Sachs earnings and recouped the losses of the previous day as European news influenced. The DJIA closed up 1.58%, S&P up 2.04% and the Nasdaq +1.63%.

It is another quiet data session for Asia today so we await the next headlines from Europe. Australia’s Westpac leading index just out showed further improvement in August (+0.8% from a upwardly-revised 0.6% the previous month, next we have DEWR skilled vacancies. We also get to see the US Conference Board’s China leading index while Japan’s all industry activity index completes the Asian session. The highlight for Europe will be the release of minutes of the last BOE minutes (asset purchase programme increased by £75 bln) followed by Norges bank rate announcement (no change expected from the current 2.25%). Euro-zone construction output completes the picture.

A busy North American session kicks off with Canada’s leading indicators followed by latest consumer inflation data from the US, housing starts, building permits and speeches from Fed’s Rosengren and Lockhart. The Fed’s beige Book is released towards the end of the session.

2011-10-18T08:19:00.001+08:00

Daily Trading Stance - Asia Oct 18 (Click link to view)

 The risk rally ran out of steam as German officials’ comments dampened expectations of a final solution to the EU debt crisis
 Renewed talk that France may lose AAA rating (Der Spiegel article) added to the downward pressure (though note this morning Moody’s affirmed the rating with a stable outlook)
 US data weak – no rebound in empire manufacturing, industrial production as expected but downward revision to previous month
 Wall St tumbled on less-than-inspiring Q3 earnings from financial sector
 China GDP and RBA minutes the things to watch for today

Sentiment u-turns as Germany dampens EU summit expectations

2011-10-18T07:47:00.000+08:00

German finance minister Schaeuble dampened hopes that this weekend’s EU summit would provide a final solution to the EU debt crisis and that further restructuring may be necessary. Prior to the comments, markets were willing to extend the positive risk run that started last week but the rally ran out of steam and reversed smartly. An article in German magazine Der Spiegel suggesting France’s AAA rating could be in danger confirmed the near-term top (though note this morning Moody’s affirmed the rating with a stable outlook, citing the ongoing strength of the French economy).

US data also disappointed and added to the more gloomy outlook with the empire manufacturing index barely changed at -8.48 (-8.82 last and markets were looking for an improvement to -4.0) while September’s industrial production and capacity utilization numbers were in line with forecasts (though IP suffered a downward revision to August’s data). On Wall St, Q3 earnings from the financial sector were less than inspiring and, combined with diminished hopes out of Europe, equities gave back all the previous day’s gains – DJIA down 2.13%, S&P -1.94% and the Nasdaq -1.98%.

We start the Asian session with the release of RBA minutes of the October meeting (expect a more dovish outlook on the economy) and then focus shifts to China data with Q3 GDP, September industrial production, retail sales and fixed asset investment. Europe focuses attention on UK CPI and ZEW surveys for Germany and the Euro-zone while we have speeches from BOE’s Haldane and the bank of Portugal governor (note Portugal budget going through approval with forecasts of a deeper, longer recession). The US session sees US PPI data followed by TIC flows and the NAHB housing market index.

2011-10-17T08:24:00.001+08:00

Daily Trading Stance - Asia Oct 17 (Click link to view)

 Risk extended its bullish run into the weekend with G20 hopes spurring better sentiment.
 US data mixed – retail sales firmer (and previous month revised higher) but Michigan Confidence retreated
 G20 had no concrete news but Europe told to "sort out" its debt problem. Positive comments from differing G20 leaders kept risk appetite buoyant at the open this morning
 Singapore non-oil domestic exports the main event for Asia data-wise.

G20 hopes sees a risk uptick into the weekend, steady Monday open

2011-10-17T07:42:00.000+08:00

All eyes were on the G20 meeting in Paris this weekend and the run-up to it saw an extension of the risk-on trade and short-squeeze in the EUR. G20 leaders told Europe to “decisively” deal with its debt crisis and the communiqué held more of the “positive-style” notes and comments with few details – those are being kept until the October 23 summit. The US also postponed the report on exchange rate policies of its trading partners at the “delicate time”, likely only reverting to it after the next round of international meetings later this month/early next. USDJPY had a spurt higher in NY trading on talk that “new measures” to weaken the JPY would be announced sometime this week.

On the data front, US retail sales were strong (up 1.1% versus 0.7% expected) with upward revision to the previous month’s data arguing for the uptick in risk appetite. However, the provisional October Michigan confidence reading was disappointing, falling to 57.5 after last month’s rebound to 59.4. Nevertheless, Wall St focused on the better sentiment out of Europe and retail sales data to post a strong finish to the week – DJIA up 1.45%, S&P up 1.74% and the Nasdaq +1.82%.

The run in to the weekend European summit could keep markets on tenterhooks with headline comments certainly market drivers. Today has started relatively calmly with opening levels very close to New York closing. Asia’s data releases focus on Singapore exports data and Japanese final industrial production/capacity utilization. Australia’s new vehicle sales also feature.

Europe starts the week slowly with Swedish house prices and Norway’s trade balance while North America announces Canada’s international securities transactions, business outlook, BOC loan surveys along with US industrial production/capacity utilization.

2011-10-14T08:32:00.000+08:00

Daily Trading Stance - Asia Oct 14 (Click link to view)

 A mixed session overnight with position adjustment ahead of w/e G20 meeting in Paris – EUR rally stalled and retraced
 US data broadly in line with expectations – no impact
 Spain downgraded one notch by S&P this morning 0 – pushed EUR down 40 pips
 Singapore MAS reduces slope of SGD appreciation, no change to band width; GDP better than forecast

EUR rally stalls as Spain is downgraded by S&P

2011-10-14T07:46:00.001+08:00

Position adjustment ahead of the weekend saw differing reactions across asset classes with the US marginally higher, US bonds firmer and equities mixed. EUR’s rally ran out of steam mid-1.38 and saw retracement through 1.37. Early strength was seen as Slovakia ratified the Jul 21 EFSF changes but soon reversed after the ECB warned that any bondholder losses following any government write-down would damage the currency and banking system. The Portuguese PM warns that the country is dependent on external aid and faces a deeper economic downturn next year.

US data releases were broadly in line with expectations with the trade balance unchanged at -$45.6 bln while jobless claims came in at 404k, marginally below the 405k seen last and 405k expected. The weekly Bloomberg consumer comfort index slid back to -50.8 from -50.2. Generally, the data had little impact on markets while Wall St was mixed – DJIA and S&P dragged down by JP Morgan while Nasdaq rallied on a rebound in the semi-conductor sector.

Early this morning S&P announced a one notch downgrade to Spain’s credit rating to AA- from AA with a negative outlook citing weak growth prospects and concerns over the health of the banking sector. This pull EURUSD down 40 pips and will likely set the tone the an extension of the risk-off trade for the day. A few important data releases today with Singapore’s Q3 advance GDP and MAS review up first followed by China’s CPI and PPI prints and then Singapore’s retail sales.

Europe will see Euro-zone CPI and trade data while the North American session features Canada’s manufacturing sales, US import prices and retail sales and finishes the week with Michigan confidence and business inventories. Have a great weekend.

2011-10-13T08:25:00.001+08:00

Daily Trading Stance - Asia Oct 13 (Click link to view)

 The risk rally extends as Slovakia says a second EFSF vote will come by weekend, and likely succeed while EU Commission outlines framework for bank recapitalization
 FOMC minutes reiterate Fed will act if economic conditions deteriorate. QE3 discussed (2 voters in favour) but held back in case needed later
 Busy data day today – Australia unemployment and China trade data for September the highlights for Asia

The risk rally continues; USD slides after FOMC minutes talk of QE3

2011-10-13T07:47:00.000+08:00

The broader risk-on trade extended overnight to the detriment of the greenback with a number of events forcing the EUR squeeze higher. Slovakian leaders said a second EFSF vote was likely by week-end and expected to pass while the EU Commission offered a framework for a European bank recapitalization plan. Euro-zone data was also impressive with industrial production up 1.2% m/m, 5.3% y/y, well above forecasts and higher than the previous month. EURUSD squeezed up to 1.3830+, one-month highs, before finding some resistance. GBP lagged behind after UK unemployment rose to 5.0%, a 2-year high, and BOE’s Dale expressed his concerns about UK growth for the rest of the year.

There was no major US data so the last meeting’s FOMC minutes grabbed the attention. The Fed reiterated its commitment to act should economic conditions deteriorate with two voters in favour of a QE3 option, seen as a “more potent tool”. In addition to Operation Twist the Committee considered reducing the interest paid on excess reserves but decided the costs outweighed the benefits. Wall St took the lead from Europe and pushed higher with financials leading the charge. The DJIA closed up 0.9%, S&P +0.98% and the Nasdaq +0.84%.

Asia has a busier data calendar today with Australia’s unemployment numbers likely being the highlight. We also see Japan’s lending data and tertiary industry index followed by the first of China’s data for September – the trade data. The Bank of Korea also holds its monetary policy meeting, though no change from the current 3.25% 7-day repo rate is expected.

Europe kicks off with German CPI data, Swiss producer prices and Sweden’s unemployment rate while the UK reports its trade balance for August. The North American session features trade data from both Canada and the US along with the weekly US jobless claims and consumer comfort index.