by Chris Becker
Macro Wrap
A slow night as US markets were closed for a public holiday (Memorial Day). So the direction on local markets this morning will be mixed, will resource stocks continue their upsurge from yesterday (apologies for lack of Trading Day) as the CRB Commodity index remains weak?
By the way, when something is 14% down on the year so far, that means its weak. Don’t believe me? Check the chart below, and understand that commodities are traded as a speculative/quantitative contract, not in line with fundamentals (price does not equal value):
Greek polling showed the “pro-bailout” party New Democracy surging, which supported Euro equities, particularly the Greek market, but not much elsewhere.
The real noise was emanating from Spain, with their PM Mariano Rajoy that troubled (i.e insolvent) bank Bankia will be recapitalised through use of government guaranteed bonds, swapping for an equity stake. The statement that this recapping would not impact the budget deficit must be treated as either laughable or delusional or a big, big bet on forthcoming Eurobonds.
Today
As I noted yesterday, local data is making a resurgence this week, with HIA New Home sales for April out today, and Japanese retail sales and unemployment this morning, before the US Case-Shiller House Price index, US Dallas Fed Manufacturing results tonight.
On the lack of direction and the floppy European equities markets last night, the SPI Futures are suggesting a 0.5% drop for the ASX200 on the open to around 4050 points or so.
Bonds:
- US 10 year Treasuries not traded due to holiday, German 10 year bunds and UK 10 Gilts seeing slight selloffs, with yields rising 2 points
- Italy was sold off again, yields rising 7 points to 5.71%, getting close to the “magical” 6% mark, whilst Spain was another 15 points, now up to 6.42%. This is what happens when you try to recap an over indebted banking sector instead of writing off the debt.
Currencies:
- FX markets don’t sleep, so the US Dollar was traded but basically flat, the DXY remaining above 82 points, whilst the Euro tried to surge above 1.26, it fell back in the afternoon and remains below its January 2012 lows and GFC low at 1.254
- The Australian dollar followed the Euro, but didn’t give back as much in the arvo, remaining just above 98.54 cents against the USD as of this morning (almost hitting 99 cents intraday)
Equities:
- The Eurostoxx 50 was off 0.6% for the night, but mainly because of the Spanish and Italian markets (down 0.7% and 2.1%, due to their banks), the majors (French CAC, German DAX and FTSE 100) all closing flat
- US markets were closed for the Memorial Holiday
Commodities:
- The crudes rose again, with WTI Crude, up 0.3% as of this morning to $91.10USD per barrel, whilst ICE Brent the same, up 0.3%, just above $107 bbl.
- Gold (USD) (which we are all debating in the MB/MA office as – is it a currency? speculation? non-dollar? shiny trinket) funnily enough followed the rest of the risk on complex overnight, and was basically unchanged with no NYMEX trading
- As for Iron ore, it climbed slightly out of its continuning funk by 20 cents to $130.70USD per metric tonne – it was almost $150 a tonne in mid April this year and around $180 for most of 2011. That’s weak chaps.
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