by Chris Becker
Macro Wrap
Well that was a fun holiday – what did I miss? Oh.
Where does it all stand now with Greece in post election turmoil, the Facebook IPO fizzle and head scratching data releases from both sides of the Atlantic and a slowing Chinese Dragon?
My colleague Greg McKenna as filled in the gaps and provided an excellent overview of what’s going on here in Trading Week and filling in for me for last week’s MacroBusiness Morning – thank you Greg!
As he said, today I’ll fill you in on what happened on Friday night, and thereafter the data releases coming through for this week.
On the weekend the G8 leaders met and released the usual “we will do everything we can to help Greece/Europe/humanity at large” statement. What did you expect them to say? We are frantically trying to cover our butts from this epic cock-up of monetary union without political union and here – let your children and grandchildren deal with it?
Anyway.
We had a brace of reports released in the US before a single European data release (German production price index – bang on consensus at 2.4% year-on-year, in a deflationary downtrend), with the Philly Fed Survey first off the line.
This survey has a manufacturing focus and the May print smashed expectations – on the wrong side – down 5.8 points on an expected plus 5-13 range. Not a good result at all to start the flow, and then Leading Indicators were released, and again, fell below expectations showing weakness not just in manufacturing but across the board.
The focus will remain on manufacturing amidst the turmoil this week. I’m expecting a small, short term bounce in risk markets after all this so-called “panic” selling.
Here’s the round up plus some weekly numbers to place it all in context:
Bonds:
- US 10 year Treasuries yields came up a bit, but still at near record lows at 1.72%. German 10 year bunds were sold off slightly – just over 1 points to close at 1.42% whereas UK 10 Gilts rallied, yields falling 1.5 points to 1.81% .
- Spain and Italy sovereign finance (remember the member states of the EMU must finance their spending by bond sales, not deficit spending) is teetering because of 6% yields – 6 friggin percent! Spanish yields came back a bit but as Greg said on Friday, how Spain got its bonds away in this market is truly baffling.
- Aussie 10 year bond yields continue their trajectory – on their way below 3%?
Currencies:
- The US Dollar (in USD index terms) is still trying and so far failing to break the highs of earlier this year and slipped in Friday trade to just above 81 points.
- The Euro bounced off its January lows, heading above 1.28 briefly before coming back below to finish at 1.276
- Probably the most-overvalued currency in the world, the Australian dollar had a flat Friday, with very heavy resistance maintained below 99 cents against the USD, currently at 98.22.
Equities:
- The Eurostoxx 50 was flat and is now down 5.2% year to date. In the UK the FTSE 100 was off 1.33% with only the Spanish bourse up as the inevitable dead cat bounce in bank stocks occurred.
- The US equity markets remain under the pump, with the Dow down 0.6%, the S&P off 0.7% while the NASDAQ fell 1.2%. Facebook’s IPO was a fizzer to say the least – and extremely over-valued. Now Apple is at $530USD per share (from over $600) – at least they make something…
- The Aussie All Ordinaries has lost 5.6% for the week and is in the red (just) for the calendar year so far. Hurray unhedged super!
Commodities:
- The global commodities complex continues to unravel. WTI Crude fell 0.42% to just over $91USD per barrel, whilst ICE Brent was flattish, just below $107 bbl
- Gold (USD) is coming back – ever so slightly – with a strong bid throughout the NYMEX and London session, closing around $US1592 – but the shiny “currency” is down 3.5% in the last 30 days – although it is up 7% in the last year.
- And for iron ore, saviour of the nation? Well good ole crusty continues to be assaulted – and I mean assaulted – down to just over $131USD per metric tonne after almost reaching $150 in the rebound rally from the bubble of last year. Where too for here? And btw, close watchers of the ASX200 will recognise the correlation:
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