Apart from the moves at the open, it has been a relatively quiet session in Asia with tight ranges in most of the key markets. USD/JPY finally managed to arrest its slide at 103 after having slumped significantly in US trade. This has somewhat helped the Nikkei to somewhat come off its lows today although the index is still weaker. Apart from the Shanghai Composite, the rest of the region seems to be struggling to gain traction heading into the weekend. Perhaps the calmer money market rates have gone a long way towards boosting sentiment along with the recent intervention by the PBoC ahead of the New Year holiday. Property stocks are also doing well on the back of strong property prices data and speculation they will continue to see improving earnings.
With central bank policies continuing to diverge, there are some interesting trends developing in the crosses with big moves in the likes of GBP/AUD and NZD/CAD, with both pairs charging to multi-year highs. While most of the headlines locally were centred around the drop in AUD/USD to a three-year low, GBP/AUD traded through 1.90 for the first time since September 2009. This has many speculators talking about the prospect of a move to 2.00 in the near future, which it last did in August 2009. The pair printed a high of 1.9032 and continues to knock on 1.90 in Asian trade. The uptrend has been relentless and we’ve seen sizeable gains since the pair bottomed at 1.80 on 14 January and it looks like there is room for further gains.
Mortgage approvals data out of the UK later today is expected to show a jump to 47,200 from 45,000. A significant miss here could see the pound finally pull back but of course if the reading exceeds expectations, we could see the recent run continue. NZD/CAD traded at its highest level since early 2004 as some investors bet on an RBNZ rate hike at next week’s meeting.
Looking ahead to European trade, we are calling the major European bourses modestly firmer at the open. The key focus in yesterday’s session was on the vast improvement seen in the PMI releases. While this pushed the single currency higher, it wasn’t particularly pleasing on the equities front. Releases are limited on the European front today with Italian retail sales being the only major release out of the region.
In US trade there will be significant focus on treasuries and the sharp drop seen in yields overnight. This move in yields was largely to blame for the US dollar weakness. On the reporting front, there are no major names to look out for but of course the general performance across the companies reporting will keep analysts busy. Monday will be a big one as we start the week off with two big earnings reports from Caterpillar and Apple.
The ASX 200 closed down around half a percent today and down about 65 points (-1.2%) for the week. Most of the big banks lost around 1% each and weighed on the overall index. Heading into the long weekend, with markets closed for Australia Day on Monday, activity was been relatively light. There was a bit of activity in healthcare space as two contrasting reports resulted in some mixed price action. CSL Limited edged higher on the back of a positive Baxter report. However, ResMed dropped nearly 5% after its earnings came in below analyst estimates. Only the materials and industrials sectors managed to finish the session in the black.