It was a positive day for most of Asia and Europe with stocks up and the US dollar on the retreat after the Greek deal was announced in our morning yesterday. But US traders preferred, or had no choice, but to worry about the fiscal cliff.
It would be easy to dismiss what seems to be the daily ebbing and flowing of sentiment about the cliff as just noise and ex-poste rationalisation of what had occurred overnight but the fact that companies are now starting to issue special dividends to shareholders as a way to forestall selling of their stock as the cliff approaches speaks volumes. It is apparent that the concern in the US and among companies and investors is real.
Which is why even with data from the US overnight better than expected on all counts it had little impact. The Durable Goods data came in at flat versus -0.6% expected and ex-transport it was up 1.5% against expectations of a -0.5% print. Case Shiller Home index was up 3% yoy, consumer confidence jumped a point and a half to 73.7 and the Richmond Fed manufacturing index sat at 9 this month against -2 expected and much better than the -7 we saw in October. But the positive impact of this data was lost in the maelstrom of the weak OECD outl0ok (see below) and the vortex that is the fiscal cliff discussions. For all the challenges facing the US economy at present at the very least we can say that a lot of the data is printing better than expected as you can see in the chart below which maps the Citibank Economic surprise index:
Turning to the OECD, even though it is a bit late to the party given the 6 monthly gaps in their forecasts, it has downgraded its growth target for 2013 for its member countries from 1.6% in May to 1.4% and gave its most dire warning since the depths of the GFC with the chief economist Pier-Carlo Padoan saying:
“After five years of crisis, the global economy is weakening again. The risk of a new major contraction can’t be ruled out.”
In Europe the Greek deal dominated and stocks were higher in London, Frankfurt and Paris with their indices rising 0.22%, 0.55% and 0.03% respectively. The Greek deal we have to say is good news for the moment and Greek got lower interest rates, more money and an interest rate holiday but can it really get down to the 120% of debt it is aiming for or will we be back here again for a 4th bailout next year? Probably yes but perhaps not until after the German election in 2013.
In the US, markets were under a little pressure all day relative to the positivity leading into the US trading day and they started to sell off a little harder once Democrat Senate Majority Leader Harry Reid said he was disappointed with the discussions, or lack their of, with the Republicans. So with 45 minutes to go before the close the S&P 500 is down 0.24% at 1402, the Dow is off 0.43% and the NASDAQ has fallen just 0.04%
It was reversal time in the past 24 hours on Global FX markets as the news of the Greek deal saw the euro and Aussie dollar rally initially but then lose ground once it became clearer that the US markets had their own concerns about which to worry. So the EUR rejected the high at 1.3009 and now sits at 1.2932 for a fall on the day of 0.29%. The AUD has been more stable and even though it made a marginal new high for the range at 1.0489 and has pulled back to 1.0457 it is only down 0.06% over the past 24 hours.
Elsewhere the USDJPY had a positive day as the USD did better across the board and we’ll have to see over the next 24 to 48 hours if the pullack over the previous three days was just a countertrend rally or the start of something bigger. For mine only a move through the high of last week would turn the outlook sharply positive again. But USDJPY is up 0.18% to 82.20 while GBP is largely unchanged at 1.6022 but looking a little wobbly.
Silver couldn’t push through trendline resistance again overnight and is down 0.45% to $34.05 oz, gold is off 0.42% to $1745 oz and oil is down 0.62% to $87.19 Bbl. Clearly in this process you can see the impact of the US dollar’s move overnight as much as anything but equally as any cursory glance at a silver chart would show technicals and trends still matter too.
In the Ags it was a huge night again as the rally continues in wheat on weather related concerns. Wheat for December rose 2.56%, corn was up 1.44% and soybeans rallied 1.65%. The fact that corn and wheat held firm when soybeans tanked recently underlies the strength of this complex at the moment.
Lets have a look at some Meta 4 charts from my AVATrade platform.
EUR/USD: Nice trendline – again EUR was unable to hold above it which is reasonable given it’s a line that stretches back to March 2011 a break will be important if it occurs. On the 4 hour charts, like the AUD below, EURUSD looks biased a little lower – perhaps 1.2885/89 and if this gives way 1.2835.:
AUD/USD: It’s not the prettiest chart you’ve ever seen and the reversal from the highs suggests this remains a range trade for the AUD and in particular if equities aren’t managing to rally any further at the moment then it is going to struggle a little. The 4 hour charts suggest a move back toward 1.0410/15:
Data: Construction work for Australia is due today and then German CPI tonight before we see Home sales and the Beige book from the US.
Here is how the markets looked at 7.30 this morning.
Twitter: Greg McKenna.
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