MacroBusiness Morning – May 28

Advertisement

by Chris Becker

Macro Wrap

In case you haven’t noticed, its all about Europe – still – although as part of Asia, we need to watch whats going on regionally (e.g KOSPI and Jakarta indices, and the STI and AUD/JPY cross).

On Friday the focal point was Spain, not Greece, where S&P downgraded five banks to junk status, with Spain’s fourth largest bank (so, like our NAB for context) Bankia Group asking for 19 billion euro more in another bank bailout to provision against bad debts. Remember – this is about private debt and regional governments (Catalonia e.g), which then translates into public debt, hence Spanish bond yields are a-booming, well over 6% from just under 5% at the beginning of March.

The dataflow was weak, with markets going off rumors and press conferences, although US consumer sentiment for May saw an uptick, surprising on upside for consensus. This is a bullish chart, no? (from Econoday)

Advertisement

 Equity markets across Europe were cautiously optimistic, all finishing in the green, whilst across the Atlantic, all US bourses finished flat – and slightly in the red, still trying to lift themselves off the mat from the current correction. Again, the moves were in bond markets, with a run to safety in gilts, bunds and T-notes.

Precious metals are seeing a slight bounce, whilst the crudes consolidate – the problem is, the USD is getting stronger, even as the Euro – a failed currency for the modern age – plumbs new depths.

Note that US markets are closed tonight.

Advertisement

Today

I’ll update our Economic Calendar shortly, but as you’ll see, local data is making a resurgence this week, but we’ll have to wait for tomorow when we will have HIA New Home sales for April, then Wednesday for more juicy first quarter construction data, and then the all-important April Retail Sales print.

The SPI Futures are suggesting a very modest open for the ASX200, at around 4040 points or so.

Bonds:

  • Another move, not a rush, to safety, with US 10 year Treasuries yields stable at 1.73%, German 10 year bunds and UK 10 Gilts seeing slight bids, with yields falling 2 points, whilst Italy was up 10 and Spain 15 as the dynamics of the golden Euro and lack of leadership continue to weigh

Currencies:

Advertisement
  • The US Dollar remains just above 82 points on the Dollar Index (DXY), weakening slightly with an uptick in the Euro,  which remains weak, below its January 2012 lows and GFC low at 1.2576 (but not the Greek Crisis Mk 1 in May 2010 – can Greek Crisis Mk 2 push it over?)
  • The Australian dollar was a volatile again and is seeing a slight resurgence, as covered by Deus Forex Machina just above 98 cents against the USD as of this morning

Equities: 

  • The Eurostoxx 50 was up 0.25% for the night, but mainly because of the French CAC and German DAX (both up 0.3%), with all other markets closely flat
  • However, this again did not translate to further action across the Atlantic in US equity markets, with the Dow losing 0.6%, the S&P 500 off 0.2% while the NASDAQ was also flat, although the short term pattern suggests a breakout very soon. Failbook closed below $32…

Commodities:

  • The crudes rose, but this was mainly WTI Crude, up 0.5% as of this morning to $91.30USD per barrel, whilst ICE Brent was flat, remaining just below $107 bbl.
  • Gold (USD) is seeing a resurgence of late, opening well into London and then boosted by almost $20USD an ounce through the NYMEX session, and as opened strongly again this morning to $1576USD an ounce. Just for sh%ts and giggles, check out this long term chart of gold (yes, the other line is M2 Money Supply, but there’s something else that’s better correlated to gold price….)
  • Finally to Iron ore, which remains very weak, climbing slightly to $130.50USD per metric tonne – it was almost $150 a tonne in mid April….
You can find me on Twitter here.
Advertisement

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.