It was another bad night for data in Europe and the US, as well as for equities across the board and the Aussie dollar which for a short time has resumed normal transmission.
Looking at the European data we see that the Eurozone reported growth of -0.1% in Q3 which on top of the -0.2% for Q2 satisfies the economists technical definition of recession but I’m guessing the 80 million Europeans out of work might already know that. Looking at the specific country GDP’s Germany and France printed growth of 0.2% which was on the money for Germany but a positive surprise for France. In Spain GDP contracted 0.3% for a year on year fall of 1.6%. Italy is under real pressure falling 0.2% which was much better than the half a percent fall the punditry expected but its annual contraction stayed at 2.4%. In the UK we didn’t get GDP but retail sales were much weaker than expected printing -0.8% in October against expectations of a flat result.
In other data we saw CPI for Europe and the US which was 1.5% and 2.2% yoy respectively. So no inflation pressure there. Jobless Claims were also out in the US and showed a huge surge to 439,000 from 375,000 previously but I think we can blame Sandy for this one. What Sandy can’t be blamed for though is the huge drop in the Philly Fed manufacturing survey from 5.7 last month to -10.7 in November. The New York Empire State manufacturing index was -5.22 which is a little better than expected.
So all in all a very poor night for data and a bad night for European and US bourses again.
At the close of play in Europe losses were across the board the FTSE down 0.77%, the DAX fell 0.52% and the CAC was off 0.52%. Amsterdam was hit hard falling 1.79% after the weak Dutch GDP of -1.01% result but Madrid managed to buck the trend up 0.29%
In the US the Dow Jones was off 28 points and the NASDAQ 10. It’s been a very weak start to November indeed.
On commodity markets, Nymex crude was off 1.23% to $85.26 Bbl and it hasn’t really gone anywhere for a while now. Gold fell 0.94% but silver somehow rose 1.21% which seems incongruous but needs investigation. Copper was up marginally and the Ags were down again. Soybeans fell 1.07%, corn dropped 0.62% and wheat fell 0.38%.
On global FX markets, while all the news is about the Yen, I want to focus on the Aussie dollar because readers know that I am of the view the USD/JPY is headed over time back toward 100. Levels are 82, 84, 93 then 99 longer term.
The catalyst or excuse for some of the past 24 hours selling in AUD/USD appears to have been the release of the RBA data on its transactions with the market which showed that it purchased a net $483 million worth of Foreign Currency last month, sold AUD. Some have characterised this as intervention but I would simply say that $483 million is not a lot in the context of a days trade let alone one month. I personally sold more than double that amount on one day back more than a decade ago when volumes were lighter with no real lasting impact – so its not intervention, its just leaning against the wind and building up a war chest for when they need to intervene to support the Aussie in the future or where they can make some profits turning the position.
Lets have a look at some Meta 4 charts from my AVATrade platform.
EUR/USD: As I noted yesterday “this rally might have legs for another day or so – strange as that may seem” and so it has. Overnight euro continued its technical rally against the USD which is in no small part aided by the strong run up in EURJPY :
AUD/USD: I’m now looking for a much deeper retracement after the levels identified yesterday gave way. The low of 1.0306 overnight is not really that bad when compared to the recent high of 1.0458 just the night before nor even last weeks high around 1.0480 but now that it has broken the up trend line I am looking for a move to the mid 1.0250 region and possibly a retest toward the bottom of the recent range at 1.0150:
Data: There are a few Fed guys talking today in our timezone then I’ll be watching the EU trade balance tonight and then US IP tonight.
Here is how the markets looked at 7.11 this morning.
Twitter: Greg McKenna.
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