DXY was strong last night. Or, more to the point, EUR was weak. CNY held up:
The Australian dollar fell against developed markets:
But could not keep pace with tumbling emerging markets:
Gold was down:
Oil rebounded:
Base metals were soft:
And big miners:
EM stocks lifted:
So did junk:
Treasuries were sold and the curve flattened:
Stocks shifted to risk on:
Westpac has the wrap:
Market Wrap
Global market sentiment: Sentiment rebounded on little news. The S&P500 is up 1.0%, oil is up 3%, and US bond yields and the US dollar are slightly higher.
Interest rates: The US 10yr treasury yield rose from 3.05% to 3.09%, while 2yr yields rose from 2.82%-2.84%. Fed fund futures repriced the chance of the next rate hike on 19 December at 80% (from 75%).
FX: The US dollar index is up 0.2% on the day. EUR round-tripped from 1.1330 to 1.1385 and back. USD/JPY rose from 113.20 to 113.60. AUD round-tripped from 0.7225 to 0.7275 and back. NZD similarly traced 0.6780 to 0.6815 and back. AUD/NZD slipped from 1.0685 to 1.0650, despite the improved risk sentiment.
Event Wrap
US Dallas Fed manufacturing index posted a steep fall in November to 17.6, well below expectations (24.5) from 29.4 last month, a 15 month low. The detail showed broad-based declines across new orders, employment and CAPEX intentions, the recent plunge in energy prices a likely culprit for weaker sentiment in the Dallas region. The Chicago Fed’s National Activity Index, a composite index of 85 data points, firmed in October to 0.24 from 0.14 in September, signifying above trend US growth.
Germany’sIFO business survey slipped more than anticipated (business climate 102.0, exp. 102.3, prev. 102.9) but broadly remained at elevated levels and in the range of the past 18 months. The faltering of momentum is less pronounced than in ZEW and PMI surveys but still shows a moderation in activity in year end.
ECB speakers, notably Chief Economist Praet and President Draghi, noted the moderation in recent data had been deeper than expected and that uncertainties had risen. Nevertheless they maintained their view that the economy was still in line with their projections and their Asset Purchasing Policy is set to end in December. However, the moderation means that the ECB will maintain significant monetary stimulus.
UK PM May appeared in Parliament to affirm the ratification of the withdrawal proposals by the EU-27 leaders. She restated that there is no other option and that Parliament should vote for the deal, however, the reception was decidedly dismissive, highlighting the difficultly facing May and her Cabinet over the next two weeks, with the Parliamentary debate now announced for 11th December. .
Event Outlook
NZ: the trade balance for October is estimated to have increased from -$1.6bn to -$0.9bn, on slightly lower imports and slightly higher exports.
US: Sep FHFA house prices and S&P/CS home price index are expected to show house price growth slowly losing momentum. Nov Conference Boardconsumer confidence is anticipated to remain well above average, 136.0 from 137.9. Fedspeakinvolves Vice Chair Clarida on ‘Data Dependence and U.S. Monetary Policy” and Bostic, Evans and George on a panel at The Clearing House Annual Conference in NY.
The key was European action with the weak IFO:
This was backed up by a more bearish ECB:
Still deluded on inflation but the wind back has begun:
So long as the EUR falls so will commodities and the AUD.
