Macro Morning: Google weighs

Advertisement

Google had a shocker overnight releasing its earnings report early and by mistake but elsewhere it was a night of consolidation in the US as markets pulled back from its recent run. Europe did a little better and Italy managed to get a huge bond auction away which is clearly a positive.

Italy sold € 18 billion in what the Wall Street Journal reports is an all time record for one auction and essentially completes their funding task for 2012. As a former Treasurer I can assure you that the day you have your funding task for the year done is always a boon so Mario Monti and his team will be much more relaxed going forward. The really cool thing about this issue – and something other European nations will have noted – is that this auction enabled your average Italian momma and pappa to take part in the deal and saw strong demand as a result. Nice work. Spain also had an OK auction result and Spanish bonds fell a little further.

European shares were lifted by the positives of the Italian auction but also the residual positive sentiment that flowed from the release of Chinese data yesterday that even though it fell to its weakest level since Q1 2009 clearly wasn’t as bad as the market had feared. Perhaps it was industrial production figures which showed a potential bottom for those looking for one.

Whatever the reason markets rallied in Asia then gave Europe a lift and the FTSE ended up closing up 0.1%, the DAX rose 0.58% and the CAC up 0.22%.

Across the Atlantic however Google caused a bit of angst on the NASDAQ when its results were released by mistake early and showed that profit declines 20% as costs rose and adverts fell. The shares got absolutely smashed on this result off 11% initially before the company requested a trading halt – they opened again later in the US day and closed off 8%.

This lead the NASDAQ to be down around 1% and the pressure on tech shares also pushed the S&P 500 down a little falling 0.2%. The very narrow DJIA was less effected falling 0.05%. Released just after the bell was the Microsoft results which showed a miss on both earnings per share and revenue – Yuk! Other misses are coming after hours and stocks are on the retreat.

This is not likely to be a good day for the ASX – Prince reckons his KC signal got triggered yesterday for a top in the market and the US price action won’t be helping today. I’ve come to a similar conclusion.

On the data front, jobless claims rebounded from last week’s sharp fall which has now been blamed officially on Califormia missing the cut off for lodgement. Claims rose 46,000 from the previous week but the 4 week moving average didn’t really budge which is the key metric for me. Of more interest was the move in the Philly Fed index which rose from -1.9 to +5.7 in October. This is a sensational number when compared to the markets expectations of a rise to +1 but as ever the devil is in the detail and it appears that most of the rise is due to prices (which I confess to not be able to fathom in the current US economy) with the employment and orders subsets in the index both falling. Just like the NAB index in Australia it is the sub components of these indices that often tell a better story than the headline number.

On FX markets the US dollar strengthened a little after the euro and other currencies did well in Asia and early Europe. Euro made a high of 1.3126 and sits now back at 1.3070 and last night’s high could well be the high for this run as you can see in the chart in technicals below. The most interesting trade however is the Pound, which hit a high of 1.6168 after some pretty strong retail sales results were released but it has since been absolutely pollaxed and GBPUSD sits at 1.6045 as I write off 0.58%. The Yen is at a 2 month low against the US dollar sitting at 79.25 as I write.

The Australian dollar did much better yesterday than I thought on the back of the Chinese data, or at least the markets interpretation of it and it ran up to 1.0409 before pulling back to be roughly unchanged from yesterday morning at 1.0365. The outlook from here will rely on what happens offshore, specifically with the stock market and the euro – short term it probably needs to consolidate by pulling back.

On commodities like the Australian dollar copper was under a little pressure and fell 0.37%, gold dropped 0.54% and crude was off a little at $91.98 Bbl. The Ags were all stronger with corn up 2%, wheat rose 1.41% and soybeans climbed 2.35%.

Lets have a look at some Met4 charts from my AVATrade platform.

EUR/USD: The question I am asking myself this morning is whether or not this topside resistance – roofline – is a valid trendline resistance for the EUR. My sense is that it is given its birth in March and then initial test in August. Is it strong though – not yet as this is the test that is needed to confirm it. But it is worth watching.

The hourly charts are -ve on the euro with JimmyR and MACD suggesting a push below 1.3005/55 will see an acceleration. On the 4 hour charts only the MACD, or the way I use them, is negative for the moment and I wouldn’t be surprised to see a move back toward 1.3010/15 if 50 gives way. On the dailies we’ll be watching the tentative trendline at 1.3140/45 to see how euro closes but for the moment overall a downside test is favoured on the day.

AUD/USD: I got it wrong yesterday as I was expecting AUD to consolidate back toward the 1.0450 (Edit – should be 1.0350) region after the strong pulse higher the previous night but instead it rallied back above 1.04. Interestingly, my hourly indicator was long the whole time and didn’t turn bearish until 3 hours ago and it seems biased back toward the trendline support shown on the chart below at 1.0330. We’ll see how support looks at this region but the 4 hour JimmyR is still positive even though the daily is suggesting the Aussie remains a sell on rallies as we saw from account above 1.04 last night.

Data: Nothing of note on the data front this morning.

No snapshot of where markets sat this morning sorry as I’m on the road.

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.

Disclaimer: The content on this blog should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation, no matter how much it seems to make sense, to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility and you should consult your investment or financial adviser before making any investments.

Advertisement