by Chris Becker
Macro Wrap
The Greeks continue to be watched closely by risk markets (and countless terabytes of computer algo’s) with hope that a new Greek government can be formed shortly easing the dip seen recently. Bond markets have settled down somewhat and equities were basically flat.
The ballooning US trade deficit continued, coming in at almost $52 billion for March, almost outside the extreme range of expectations, whilst weekly jobless claims came in right on consensus at 367K and seem to be back on “trend”, as the participation rate, like our own, continues to fall. Reading wraps from the insto’s this morning it seems they also haven’t seen through these figures for what they really are, just like the consumer credit “growth”, which as Sober Look explains this morning, is unsustainable student credit.
What is it with the Americans and bubbles or more importantly the inability of Australian financial institutions to see them? Anywhere, particularly domestically.
Moving on, one of the US’s biggest “banks” – effectively a publicly backed hedge fund in disguise – JP Morgan announced a $2billion loss, due to a failed whale trade from only one trader. The stock price fell nearly 6% and more losses are expected to be announced shortly – here’s the lowdown from Bloomie although I think Bernie Hickey at interest.co.nz sums it up great here:
This is a bank that can borrow unlimited amounts from the US Federal Reserve and is effectively too big to fail.
No wonder there is so much protest against governments bailing out banks with one breath and then demanding austerity with the next. This is at a time when those very same ‘Too Big To Fail’ banks spend millions lobbying to stop the likes of the Volcker Rule which would separate licensed banks from their proprietary trading arms.
The ‘whale”s name is Bruno Michel Iksil.
He was born in France….Shades of Jerome Kerviel?
Plus ca change.
The futures are pointing to a flat open on the S&P/ASX200 share market, at 4295 or so.
See charts of all major markets at bottom of post.
Bonds:
- US 10 year Treasuries were unchanged again, with German 10 year bunds, sold off slightly, yields rising 2 pips to 1.53% but UK gilts sold off strongly, yields rising 8 pips to 1.98%
- Peripheral bonds have come back, Italian and Spanish bond yields falling after hitting recent highs, near 6% on the latter
Currencies:
- The USD remains strong above the 80 point barrier on the Dollar Index as the Euro continues to stay below support at 1.30
- AUD is still dicing with death/parity, just above 1.006 against the USD – in a short term decelerating downtrend. It wants to break free, I want to break freeeeeeeeeeeee.
Equities:
- The Eurostoxx 50 was up nearly 1% and green across the board, with the IBEX 35 Spanish market remaining very volatile this time rising more than 3%
- The US bourses were relatively flat with the NASDAQ falling slightly, the S&P 500 up 0.25% still dicing with support at 1350 points, the Dow Jones also flat
Commodities:
- Oil was smacked again and moving in unison, with ICE Brent falling nearly 0.5% to be below $113 per barrel and NYMEX WTI crude falling further to $96.46 USD per barrel
- Gold (USD) had a relatively quiet session, staying at $1593USD an ounce
- Iron ore import prices into China have been hammered again, falling $2 per metric tonne, wiping out March and April gains, down to $139.30 a metric ton
Market Charts
| AUD_USD | EUR_USD |
| US DOLLAR INDEX | GOLD USD |
| S&P500 | VIX VOLATILITY |
| DAX 30 | SPOT BRENT CRUDE |
| RJ/CRB COMMODITY INDEX | CHINA IMPORT IRON ORE |
Sovereign 10 year bond yields
| UK | USA | ||||||||
|
JAPAN | GREECE | IRELAND | SPAIN | ITALY | FRANCE | GERMANY | PORTUGAL | AUSTRALIA |
|