Overnight the UK’s office of national statistics released Q3 GDP figures showing a rise of 1% for Q3 which was much better than the 0.6% expected and a nice reversal from the 0.4% fall in GDP reported for Q2. Year on year the growth rate is flat. After 3 quarters of contraction, the news that Q3 was positive is welcome but hands up all those that are surprised that the Olympic Games helped the UK drag itself out of recession? Equally the Diamond Jubilee celebrations and holidays distorted the numbers in a positive manner.
UK GDP helped drive Sterling higher overnight but neither it nor the better results for Unilever and a couple of Nordic banks could help equities shake of their recent dour tone. At the close of play the FTSE was essentially flat falling just 0.04%, the DAX rose 0.1% after competing reports from BASF, which confirmed its outlook and Daimler which gave a 2013 profit warning. In France the CAC dropped 0.4% with France telecom also giving negative guidance for 2013 and S&P downgrading 3 French banks including BNP Paribas with a warning on 10 other banks. Also worth noting, in particular because it highlights Spain’s plight, was the results from Santander which is Europe’s largest bank. The Madrid based bank reported a 94% fall in Q3 profit as it increased provisions for real estate and weakness in Latin America – Madrid’s stock exchange only closed 0.14% lower.
In the US, Durable Goods rebounded from last months 13.1% drop with a 9.9% rise but still lower than 2 months ago. With the exclusion of transport the rise was 2% which was also less than last months fall of 2.1%. The 3 month rate of change remains close to the weakest it has been since mid 2009. Jobless Claims reversed some of last week’s bounce with a fall of 23,000 but the 4 week moving average rose again.
At the close of play the S&P 500 closed up 4.24 or 0.3% to 1412 while the Dow rose 0.20%. The NASDAQ rose 0.15%. After the bell Amazon has released its numbers with a huge miss reporting earnings per share of -60 versus expectations of -8 cents per share and it has downgraded its sales outlook for Q4. We are waiting on Apple.
In Japan there seems to be confirmation, at least in the press, that the Bank of Japan is to add ANOTHER 10 trillion Yen to its current 90 tln Yen QE program. With the Nikkei article also noting an undershoot on the 1% inflation target the combination sent the Yen higher once again. USDJPY is at 80.23 this morning after rallying from 79.74 yesterday. The Yen also initially lost ground against the euro but that move faded as the euro lost ground against the US dollar to sit around 1.2947 this morning well off its high of 1.3023.
In other currency news, as noted above Sterling was better bid as a result of the surprise print on GDP trading up to a high of 1.6144 where it seemed to hit a wall of sellers having sat here or just under for 23 bars on the 15 minute charts or the best part of 6 hours before pulling back a little to 1.6123. This level roughly corresponds with a convergence of two trend lines which may help explain the selling. Against the EUR however GBP was much stronger and EURGBP is heading back toward the bottom of the 4 month up trend.
For the Australian dollar it has been a wild couple of days first rallying up to and once again rejecting the 1.04 region before making a high of 1.0398 overnight. It is roughly unchanged at present and sits at 1.0356 after making a low of 1.0332. Obviously the Aussie benefited both from the higher than expected inflation figures and the associated diminution on RBA rate cut pricing and the data out of China on the flash PMI but if anything the strong AUD probably heightens the chance of an RBA rate cut as soon as the next meeting when viewed through the prism of a monetary conditions index.
On commodity markets crude and gold both reversed some of their recent losses with crude up 0.48% to $86.14 Bbl and gold up 0.68% to $1716 oz. The Ags were lower with corn down 1.69%, wheat down 1.19% and soybeans are off 0.37%. It seems that some of the move higher in gold is being blamed on economic hopes and news of the BOJ further easing – but if you believe this can I just point you to the fact that Japan can’t even generate 1% inflation and leave it at that.
Lets have a look at some Met4 charts from my AVATrade platform.
EUR/USD: The EUR has clearly not broken the uptrend but when I look at this chart subjectively I can’t help but feel it’s just a matter of time. First stop is the uptrend level of 1.2897 and then there is big support from the 200 day moving average at 1.2833 and then the range bottom at 1.28. Key to remember EUR hasn’t yet broken its recent uptrend and we don’t pre-empt trend breaks:
AUD/USD: AUD has been choppy within a range recently even though that range has been a fairly decent one of around 170 points. 1.04 remains resistance with support at 1.0335. A break of 1.04 or 1.0252 is required to push AUD substantially either way:
Data: There is only one number that matters in the next 24 hours and that is the release of the first read of Q3 GDp from the US.
Here is how the markets looked this morning.
Twitter: Greg McKenna . He is the Chief Investment Officer of Macro Investor, Australia’s independent investment newsletter covering trades, stocks, property and yield. Click for a free 21 day trial.
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