by Chris Becker
Macro Wrap
It is perhaps fortuitous that probably one of the most anticipated Monday morning opens of this year would occur when most of Australia (except us “wolves” here at MB) is on a public holiday! Quick – get thee to our friends at interest.co.nz and watch the NZX50 share market open, because this will be the harbinger of things to come throughout Asia, as world risk assimilates the “it was never going to occur” Spanish bank bailout, and the very mixed Chinese data print on Saturday.
Before the news of the bailout, data released on Friday night included a worrying deceleration in Italian industrial production (this is hugely correlated with GDP) with April falling almost 2% and down almost 10% over the year, in the worlds 7th largest economy. Trade figures across Europe showed the imbalance between the “core” and “periphery” states continues – another major dilemma (like youth unemployment) that European politicians and policy makers have woefully failed at trying to resolve.
Trade figures in the US were also released and showed a slightly smaller deficit for April, but this is another imbalance that is also not going away, with the trade balance still trending down and export growth (supposed to double under President Obama’s plan) weakening again:
On the Chinese data – we had a nearly Aussie like 3% yearly CPI, an increase in exports although industrial production figures were very good, and retail sales whilst nominally very good (almost 14% year on year) are decelerating as well alongside fixed asset investment growth, but the latter is still dominant. More imbalances….
Today and the Week Ahead
Its CPI week – you know, the measure of “inflation” – which we should all take with a grain of salt. I’ll update our economic calendar shortly, but the major releases this week include the release of the US Treasury Budget on Wednesday, the brace of CPI for Europe and US, the Empire State manufacturing survey alongside industrial production. This should give a better insight into the robustness of the ongoing recovery in the US economy.
Although markets are closed today, futures are looking good – up over 80 points or nearly 2% to 4140 points.
Here’s a quick summary of Friday night’s move in markets. For a longer term view, check out my Trading Week article here.
Bonds:
- US 10 year Treasuries yields slipped again but only slightly, at 1.63%, with German 10 year bunds yields gaining 4 points to 1.32%
- Peripheral bonds took back Thursday’s gains, with Spanish and Italian 10 year yields dropping by 13 and 6 points respectively and still dicing around the 6% level (doesn’t matter for either now – bailouts on the way!)
- Aussie 10 years remain over 3% but only just at 3.03% and are likely to continue climbing as capital moves back to risk.
Currencies:
- The US Dollar took a hit, falling .69 points on the Dollar Index, mainly due to Pound Sterling and Euro, which gained almost 100 pips to 1.2642
- The Australian dollar also rebounded again, dicing with parity and is at 99.71 cents against the USD this morning
Equities:
- The Eurostoxx 50 finished flat for the day, with the major mover the Spanish IBEX 35 up 1.77% – nice work bank speculators
- The German DAX slipped 0.2%, with the FTSE 100 doing the same.
- In the US however, the mood was a lot better, with the Dow up 0.7%, the broader S&P500 up further – at 0.8% and the NASDAQ even more! Up almost 1% Stocks do love bailouts!!
Commodities:
- So do energy speculators! WTI Crude jumped over 2% to $86.50USD per barrel, whilst ICE Brent was up even further, 2.6% to be above $100 again at $102.11
- Gold (USD) rallied firmly throughout all sessions and has come into the Asian session with a bone in its mouth, pipping above $1600 USD this morning. One to watch, but still stuck in a trading range – I’m looking at the $1625 key level VERY closely.
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