There were three major data/news/comments that moved markets last night. First, a German based expectations index (the IFO) rose, which is a good leading indicator of the powerhouse German economy but was in stark contrast to the weak PMI data of last week. Next, Chancellor Merkel gave hope to a merging of the temporary EFSF and the permanent ESM facility (around a trillion euros in size) to make the bailouts of the EZ periphery a rolling permanency. Of course markets love that…
Finally, The Bernank spoke. Again, the paradox of markets at play – the economy is slowing down, unemployment is still a problem, so the Fed will keep accommodating low interest rates to foster faster economic growth. In other words, more of the same. And of course the markets love that.
Let’s have a look at the detail before the open of the local markets – remember to read my weekly analysis of all major macro markets in Trading Week to put this daily noise in context.
The UK FTSE finished up 0.8% at 5902, the German DAX rallying over 1.2% to 7079 points, above the the important 7000 level. There’s important localised data for both bourses to react to this week – CPI and GDP, so keep an eye on those prints and the ongoing ructions in peripheral debt markets.
The Euro (EUR/USD) jumped to 1.335 on the move, building on gains made since the start of the year, with support at 1.30 against the USD. The intraday chart below shows the picture:
As a result, the USD Index fell half a percent to 78.9, still above its support level at 78 points but one to watch in the coming week. As Deus Forex Machina analysed this morning, the AUD is making another move in line with risk markets. The Aussie jumped above 1.05 against the USD where it is at this morning at the start of Asian trading.
On the other side of the Atlantic, the US bourses were ebullient, as expected. First, the bubble we love to hate, Apple (AAPL) gained almost 2% to $606.98 a share, whilst the S&P500 rose 1.4% to 1416 points as the Dow Jones Industrial Average also went up 1.2% to 13,241 points. See my analysis of the S&P in Trading Week for my thoughts on where it could be going…
On to the important debt markets, where the 3 major 10 year bonds I follow US 10 year T-Notes, German bunds and Aussies (Kangaroo) were all sold off, with yields rising, the biggest mover bunds, possibly on Chancellor Merkels comments around the firewall dilemma. The results were 2.25%, 1.95% and 4.2% respectively, with the Aussie below the cash rate (at 4.25%).
To commodities – first, copper was a major mover overnight, up 1.8%, whilst in energies, Brent up $1.52 a barrel to $124.83USD, with WTI crude also up $1.50 at U$106.87 per barrel – note the base at $105 a barrel on the chart below:
Gold (in USD) had a big night, jumping $30USD an ounce on The Bernank’s comments to $1690 where it is making gains at the start of the Monday session here in Asia. Here’s the overnight chart, where it passed the $1665 level I explained yesterday it needed to make headway against the short term dominant downtrend:
On these excellent leads the S&P/ASX200 index futures point to a much higher open, up 40 points or more to 4310 points, with the New Zealand NXZ50 opening up 0.3% to 3483 points providing a good lead for the Asian session.
My Trading Day post will cover the Asian market session and the “ASX8” stocks after the close in the afternoon.
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