Macro Wrap
Apologies for the lateness of this update, but I was up watching the events unfold to the early hours of the morning whilst doing a large round of quant work. So what happened and where are we going? I’ll have a few things to say in Trading Week tomorrow morning, covering these markets, so for now, I’ll provide the relevant moves and data releases.
My Twitter feed was going nuts with the usual doom and gloomers and hanger’s on posting on every word the ECB President, Mario Draghi, said at his press conference last night. That most of it was deluded did not pass by unnoticed… Rates weren’t cut and left at 1%, and no further easing was hinted at, for now. Back in the bizarre world of Euro debt, Spanish and French debt auctions were successful, with 10 year yields falling.
The major mover in the US was the ISM non-manufacturing index which surprised on the downside, even though it still registered an expansion at 53.5. Just like our own PSI Index, new orders and business activity were weaker (but nowhere near as bad as here). Offsetting this was the weekly jobless claims – 2 things to note: first, the previous week was revised up and this week surprised well outside consensus on the upside.
The takeaway here is look at the moving average, this is far too volatile a measure to cling on to (as some economists like to) and you also need to “look through” the numbers to participation rates – a growing number of Americans are just falling off the employment registries and giving up looking for work. Bingo, unemployment stays steady or goes down!
Today, just as I write this, the RBA will release its Statement on Monetary Policy, which should see some substantial revisions to growth and inflation expectations, given the panic button was hit earlier this week. Regionally, all eyes will on the HSBC measure of services PMI (lets hope its better than our own).
See charts of all major markets at bottom of post.
Bonds:
- US 10 year Treasuries were unchanged, as were the other safe haven with German 10 year bunds still at historic lows
- Peripheral bonds recovered, with Spanish, French and Italian 10 years yields falling 6, 5 and 4 pips respectively but still high
Currencies:
- The USD was strong again all night with the Dollar Index maintained its position above 79 points, with the Euro weaker, and heading for short term support at 1.315
- The Yen fell sharply against the USD at first spiking above 80.5 before coming back to where it started at 80.12 again – which should bode well for the Nikkei when it re-opens on Monday (closed today and y’day)
- AUD is all the rage around the MB office at the moment – its remarkable resilience in the face of easing rates and possible recession outweighed by the “risk-on” move, err still on, in risk markets as its No.1 proxy:
Equities:
- The Eurostoxx 50 was only off 0.1% in reaction to Super Mario’s speech, whilst most markets were flat to slightly down, the only big move the Italian FTSE MIB down 0.7%
- The US bourses were worse off and reacted negatively to the ISM and jobless claims print, with the S&P 500 slipping 0.7%, the Dow Jones off 0.5% whilst the NASDAQ 100 lost over 1% mainly because of, yes you guessed it – Apple (AAPL) which lost nearly 1% or just over $4 a share to $581
Commodities:
- The real movers last night were commodities – the CRB Index giving back all of its recent gains in the last two days, again close to the 300 point mark
- The main reasons were two fold – commodity traders are a smart bunch and oil prices are the barometer of economic potential. The recent inventory report analysis has sunk in as well, so futures were sold off, with ICE Brent off 1.7% to $116.69 per barrel and NYMEX WTI crude crunched, down 2.5% to $102 USD per barrel
- Natural gas continues to give trader’s their daily pay cheque, after surging recently, it slumped on Wednesday by 5% before surging again last night, rising from $2.25 to $2.32 – oh to be a commodity trader right now!
- Gold (USD) continued its 3 day slump, falling $15USD per ounce to $1636USD an ounce – I’ll talk more about this tomorrow at Trading Week
- Iron ore import prices into China have recovered very slightly, gaining 30 cents to $US 144.90, still in an uptrend, but slowing down. One to watch.
Market Charts
| AUD_USD | EUR_USD |
| US DOLLAR INDEX | GOLD USD |
| S&P500 | VIX VOLATILITY |
| DAX 30 | SPOT BRENT CRUDE |
| RJ/CRB COMMODITY INDEX | CHINA IMPORT IRON ORE |
Sovereign 10 year bond yields
| UK | USA | ||||||||
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JAPAN | GREECE | IRELAND | SPAIN | ITALY | FRANCE | GERMANY | PORTUGAL | AUSTRALIA |
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