by Greg McKenna filling in for Chris Becker
Macro Wrap
More downside price discovery overnight as the woes and fears over Greece continue to impact sentiment and thus trading in markets. Greece was unable to form a government and the President felt it necessary to call fresh elections. Consequently stocks were lower across the board, the euro fell further, commodity shares were under pressure and the Aussie dollar sits just above 0.9900 this morning. Interestingly, as you can see in the chart below, gold retreated further from the break of the uptrend that began in 2008 and is only USD 9 an ounce from what could be a huge break lower. As you know, I always respect support unless or until it breaks, but if Gold breaks USD 1535 oz and closes below this level it will probably be suggestive of an environment where the USD is in the ascendancy and markets are in a funk – so I’ll be watching gold closely.
Data wise in late Asian trade Germany surprised the market by printing 0.5% for its GDP growth against expectations of 0.1% but over the rest of Europe lived up to moribund expectations printing 0.0% growth for the first quarter – but this was better than the -0,2% the punditry had expected. Elsewhere in Europe the ZEW sentiment survey showed expectations of economic growth do, however, look to be worsening – no surprises there but clearly not terrible as you can see in the chart below.
In the US, the economic data was a little mixed with the Empire Manufacturing survey coming in better than expected at 17 versus the pundits 9 but retail sales continued their recent downtrend. Elsewhere homebuilder confidence, as measured by the NAHB survey, climbed to a 5 year high.
As an indication for trade this morning the futures on overnight trading are pointing to a fall of around 34 points or 0.8% given where the SPI futures are sitting. The Australian market as I noted yesterday in the ASX wrap is sitting right on support and is likely to bust it today so watch out below.
Bonds:
- US 10 year Treasuries were little changed overnight and sit at 1.765 %. German 10 year bunds closed up ever so slighthly at 1.46% as did UK 10 gilts which sit at 1.892% this morning%
- The periphery continues to widen to the core and Italian 10’s were up 16 points to 5.835%, Spanish 10’s up 12 points to 6.29% and Greece up 1.54% to 27.85%.
Currencies:
- It is all about the USD as it continues to build topside momentum with the euro under pressure again and now just above 1.27 and closing in on my 1.2660ish target.
- The Australian dollar still can’t avoid the carnage in global markets as the world’s favourite punt. It is still weakening faster than currencies such as the EUR reflecting this fact. As you can see in the uptrend in EUR/AUD in the chart below. Is there about to be a rotation in favour of the Aussie over the euro? Too early to tell but a break of 1.2776 (current price 1.2814) would suggest so.
Equities:
- The Eurostoxx 50 fell another 1% overnight and sits at 2178.67 while in London the FTSE 100 was off a less worrysome 0.5% the rest of Europe was off slightly less than 1% except for Spain which was down 1.6%.
- The US equity markets are under less pressure than their European counterparts and the big three indices of the Dow, S&P and NASDAQ down around 0.5%, give or take.
Commodities:
- Crude fell another 0.8%% based on the WTI benchmark and sits at USD 93.98 bbl
- Gold (USD) as noted above is close to important support and sits at USD 1544.38 oz
- Our friend Dr Copper was belted again falling 1.59% and like other growth benchmarks has now also fallen off a cliff.
- H&H’s favourites are still weak with iron ore down another 0.6% to $135.90, just above the February low. 12m futures dropped a further 1% to $122.19.
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