by Chris Becker
Macro Wrap
Apologies for no Trading Day yesterday, living regionally is great, but internet access can be well, adventurous.
Onto the show…Another volatile session overnight with big selloffs in European equities (whilst core bonds were bid up, peripherals dumped), crude tumbling, with huge continued volatility in gold, whilst the USD climbs ever higher. The rationale – more contagion and timeliness worries with the probable Greece exit from the Euro, with European administrators falling over themselves to blame each other and come up with solutions that won’t work. Again. (tip – write off the debt and start again. Its a 7000 year old tradition, its your responsibility as leaders, not bank shareholders.)
Across the Atlantic, things were looking dire, but late buying in the session boosted US stocks (even Facebook managed to finish up a little!) New home sales surprised on the upside, with the Federal Housing Finance Agency (FHFA) House Price Index (HPI) index also surprising, up 1.8% for the month and over 2.7% for the year. Looks like a good recovery there, let’s hope that annual house price increases in the US stay at that level, like they should – around the world.
Today:
Data today locally is sparse again but regionally we should get flash Chinese manufacturing PMI (purchasers manager index) after lunch time. Then tonight, an onslaught of PMI’s across Europe, UK GDP for Q1 which is likely to confirm the technical recession, and then weekly US jobless claims and durable goods orders.
The SPI Futures are suggesting a nearly 20 point or 0.5% gain for the ASX200 on the open, at around 4080 points or so.
Bonds:
- US 10 year Treasuries were flat whilst German 10 year bunds were heavily bid up, yields falling by almost 9 points to 1.38% , alongside UK 10 Gilts, yields falling 10 points to 1.76% as contagion spreads and likelihood of continued UK recession with tonights GDP print
- Spain and Italy bond volatility continues, with the former giving back most of the previous sessions gains, up 13 points, and now at 6.16%, the latter up to 5.63% This is not good
Currencies:
- The US Dollar (in USD index terms) soared above 82 points, this time because of Euro weakness (and Yen, and Pound – only the Swissie is holding up against King Dollar)
- The Euro is looking sick indeed, falling below 1.26 against the USD, now below its January lows at 1.2679, and in line with its GFC low (but not the Greek Crisis Mk 1 in May 2010). This is broken currency IMO, time for it to be taken out the back and shot (i.e Germany go back to the Mark and rebalance European economy), but hey I”m only a trader:
- The Australian dollar paused its short and medium term downtrend overnight, finding a temporary (?) bottom at just below 97 cents against the USD last night, recovering this morning to 97.67. As I said yesterday, a break below the key level of 96.5 cents, probably into another round of “this is not an emergency cut” of 50 basis points by the RBA, would likely send the risk proxy back to its 2010 average of 90 cents against King Dollar.
Equities:
- It was clobbering time, or unicorn hunting season on European markets, with almost all closing down at least 2% with Italy down 3.3%, down 12% for the year, Spain down 3.7% down 23% for the year. By the way – most of this is due to overleveraged banks after the popping of a housing bubble – GB, care to comment on why you think this would be different for the ASX200?
- The Eurostoxx 50 was therefore down 2.6% for the night.
- However, this again did not translate to further action across the Atlantic in US equity markets, with the Dow flat again, the S&P 500 up slightly (0.17%) while the NASDAQ gained back yesterday’s losses. All the major US bourses are struggling to lift themselves off the mat from this stage of the correction and perhaps give Uncle Bernanke an excuse to turn on the printing press again?
Commodities:
- The crudes took back recent gains and then some, with WTI Crude down 2% to just below $90USD per barrel, whilst ICE Brent was off by 2.8% to $105.50 bbl. I think this weakness is now locked in – growth around the world is tapering, and oil (and copper) is the barometer.
- Gold (USD) was assaulted again last night, falling over $20USD per ounce before rebounding alongside US equities (more QE rumors?) closing at $1561USD per ounce. This is not looking bullish for the “currency” metal. Silver is now below $28USD per ounce.
- Dr Copper remains weak too, replicating the US bourses, trying to lift itself off the mat, now back to its pre-LTRO liquidity led low:
- Iron ore, after seeing a tiny bid yesterday, was sold off sharply, down $1.20 to $129.90USD per metric tonne: this does not bode well for the ASX8, alongside gold prices, crude prices, funding costs rising, house prices falling. Its not rocket science…. (Green is ASX200)
Click here for our economic calendar.
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.