by Greg McKenna filling in for Chris Becker
Macro Wrap
Two big headlines dominate the macro landscape this morning and they both speak to the fact that after 5 years of the GFC things really haven’t changed that much and lessons have not been learned. The two primary themes are of course the pending Greek exit from the euro and JP Morgan’s “hedging” debacle which has cost it $2 bln so far but stripped much more than that off it’s market cap as you can guess from the share price chart below – you’ll also notice a massive spike in volume of JPM shares traded which is indicative of a little bit of panic but equally of a stock that might have just lost its lustre and swagger.
These twin concerns helped equities and other risk assets close the week under pressure but the market has not broken wide open just yet.
Datawise, the US calender Friday showed that the inflation outlook remains very benign with April PPI down 0.2% against an expectation by the punditry of a flat result. The YOY result was consequently 1.9% versus expectations of 2.1%. Elsewhere the Uni of Michigan confidence survey was a little stronger than the market had expected at 77.8 versus 76.0 expected. European inflation data held little surprises with the Harmonised CPI coming in at 2.2% as expected.
The futures are pointing to a fairly flat open on the S&P/ASX200 share market, at 4287 or so and I don’t think that China adjusting the reserve ratio over the weekend, which was widely anticipated, will have as much positive impact as it has in the past due to the necessity of the reserve cut which flows from the weakening economy.
Bonds:
- US 10 year Treasuries closed the week at 1.84% down about 4 points on the week while German 10 year bunds closed the week down 7 basis points to 1.51%. In the UK gilts dropped 3 points to close out the week at 1.96%
- Reflecting the re-ignition of the Greek and Spanish problems peripheral bonds were under pressure over the week with Italian 10’s up 7.4 points to 5.48%, Spanish 10’s up 27 points to 5.96% and Greece up 3.84% to 23.72%.
Currencies:
- The USD continues to build topside momentum with the euro under pressure just above 1.29 and a safe haven bid clearly accruing to the Greenback. Euro looks head toward 1.26 to me which will bias the Dollar Index higher yet
- Someone is protecting a position at 1.00 or there abouts in the AUD/USD is my guess as it has assiduously avoided trading there just yet. It is not far off my 0.9960/80 target I’ve had for about 5 cents now so I’m not going to get too bearish very short term but it does only seem a matter of time before it breaks lower.
Equities:
- The Eurostoxx 50 managed a small 0.32% gain Friday although the Spanish market fell 0.7% and incongrously Greece was up by a similar amount. The debate of whether its a buy or a sell remains and Houses and Holes has covered it nicely in his piece this morning.
- The US equities were largely flat – small moves of down around 0.3% for both the Dow and S&P 500 down 0.3% while the NASDAQ was up a stunning 0.01%.
Commodities:
- Crude fell another 1% Friday, heating oil was down 0.66% and Gasoline fell 0.3%
- Gold (USD) was down a little again and sits at $1584 USD an ounce
- Iron ore was whacked again, down 1.22% to 137.60. We’ll see what the RRR cut does, which rescued the price ealrier in the year. NNewcastle Coal traded on the ICE Futures exchange was up a little and trying to find a base it might seem.
Disclaimer: The content on this blog should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation, no matter how much it seems to make sense, to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The author has no position in any company or advertiser reference unless explicitly specified. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult someone who claims to have a qualification before making any investment decisions.