by Chris Becker
Macro Wrap
Well. Well, well. That was another interesting night – I was actually up most of the night and through the morning (don’t ask why) and was fascinated by the responses from the permabulls and permabears to the news and dataflows of last night.
Chinese bank cuts rates by 25 basis points! Buy resource stocks! Buy commodities! Buy Chinese stocks!
The Bernank says, mmm, I’ll wait a bit until pressing the print button… Sell gold! Sell commodities! Everything is fine, but we need stimulus!
Etc, ad nauseam (actually just nausea reading some of the tweets last night).
They say risk appetite was boosted last night, in aggregate – I’m not so sure, maybe in the short run, because why would China want to cut interest rates if everything was fine? I think the PBOC had a peak at this weekends Tier 1 data releases and wanted to cushion the blow?
US equity markets were up and then deflated on the Bernank punchbowl takeaway, whilst bond markets shrugged off a Fitch downgrade on Spain to BBB.
In between Ben Bernanke testifying before Congress (“the United States is not Greece”), weekly jobless claims came out and were relatively steady at 377K, but last week’s was revised up to 389K. More important than the weekly print, check out the moving average – its now flat – this is what has The Bernank and other’s concerned:
Finishing up the major data, US consumer credit was released this morning and showed the education bubble is still intact – although the print was very weak, at $6.5 billion, almost half the consensus print. Almost all of this credit is non-revolving consumer loans owned by the Federal Government (just like mortgages) – and its almost all education loans:
Today and the Week Ahead
Another GDP boost – Japan just reported its revised Q1 GDP print, up at 1.2% over the quarter, or 4.7% over the year -beating Australia to the gold! Probably had more to do with deflation and the y-o-y figure coinciding with the earthquake, but let’s leave it at that.
Governor Stevens of the RBA has a chat this morning, which will be interesting – called “Glass half full”. We also have trade balance figures for April, and then home loans including investing as well
The SPI Futures are up over 10 points to 4120 points.
Here’s a quick summary of last night’s move in markets. For a longer term view, check out my Trading Week article here.
Bonds:
- US 10 year Treasuries yields slipped by 2 points to 1.62%, whilst other maturities were unchanged on Bernanke’s speech with German 10 year bunds yields up by 4 points to 1.37%
- Peripheral bonds recovered last night, with Spanish and Portuguese 10 year yields dropping by 19 and 27 points respectively
- Aussie 10 years remain over 3% at 3.11% and are likely to continue climbing as capital moves back to risk.
Currencies:
- The US Dollar came back a bit last night, as gold was hammered, as a Fitch downgrade took the life out of the Euro which remains at 1.2568 against the dollar
- The Australian dollar rose above parity last night, but then came back sharply and remains just above 99 cents against the USD this morning
Equities:
- The Eurostoxx 50 finished up slightly by about 0.25% with muted gains across the peripherals
- The German DAX was up nearly 1%, with the FTSE 100 still climbing and up 1.2%.
- In the US however, sentiment was weighing everything down, the Dow up 0.4%, but the broader S&P500 finishing exactly flat, whilst the NASDAQ slumped by nearly 0.5%, with Failbook down almost 2%
Commodities:
- WTI Crude fell by 1.7% to $83.50USD per barrel, whilst ICE Brent was the same, down 1.5% to below $100 again – no oily punchbowl for your!
- Gold (USD) had another shocker, slipping coming into Bernanke’s speech, but then crashing once the punchbowl poofed out of existence, falling $40USD an ounce within minutes to just over $1580USD an ounce. It recovered somewhat and stands at $1590USD, but as I mentioned in Trading Day yesterday, this is not looking bullish in the short term for the shiny metal:
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