Morning Report Wednesday 25 January 2012
Market wrap
Risk sentiment fell in London and rose in NY for a small net loss. The S&P500 has recovered from -0.9% to 0.3% currently. The main drag on sentiment was the rejection by Eurozone finance ministers of the offer by Greek bondholders to swap old debt for new with a 4%+ coupon, the officials requiring a 3.5% starting coupon. A pre-London WSJ article that Portugal may require a second bailout and Standard & Poor’s downgrades of major French banks continued to weigh. The rating agency also commented the evolving Greek deal was likely to result in a selective default rating for the country. There was some offsetting positive news including Spain’s successful 3mth and 6mth bill auction, and above-consensus and improved Eurozone PMI’s. The CRB commodities index is up 0.2%, oil -1.0%, copper unchanged, and gold -0.7%. US 10yr treasury yields are 1bp higher at 2.06%, having ranged between 2.03% and 2.08% overnight. The 2yr auction went well with a 3.8 bid-cover ratio (12mth average is 3.4). Greek and Portuguese 10yr government bond yields fell by -20bp and -25bp respectively.
The US dollar index is little changed after gyrating inversely with risk sentiment overnight. EUR consolidated between 1.2955 and 1.3063. USD/JPY surged from 77.00 to 77.85 after the BOJ downgraded its growth outlook at its meeting. AUD extended its domestic session slide to 1.0428 before recovering in NY to 1.0483. NZD similarly recovered from a London low of 0.8056 to 0.8108. AUD/NZD fell from 1.2960 to 1.2930.
Economic wrap
US Richmond Fed factory index rose to a better than expected +12 (consensus +6) in Jan (from 3). The move to a 10-month high was led by an increase in shipments from +3 to +17 and the new orders index from +7 to +14.
CAN retail sales (MoM) rose 0.3% in Nov, the fourth positive print in a row. Sales increased to C$38.7bn mostly led by gasoline. There was an increase in seven out of the 11 major categories. Excluding autos and fuel, sales were up 0.2%.
Eurozone (flash estimate) PMI manufacturing rose slightly in Jan from 46.9 to 48.7. The second consecutive rise after seven declines, mainly driven by a strong German number (50.9 from 48.4), although offset slightly by a dip in France (48.5 from 48.9). The index, however, still remains below the key 50 level signalling a continued contraction in the manufacturing sector.
Eurozone (flash estimate) PMI services rose in Jan from 48.8 to 50.5. The survey has risen for three consecutive months and has moved back above 50 after four months of contraction (sub-50). The January breakdown revealed decent rebounds in both France (up to 51.7) and Germany (to 54.5).
Eurozone industrial new orders (MoM) fell 1.3% in Nov compared to a 1.5% rise in Oct (revised down from 1.8%). Although non-durable consumer goods rose 1.7% and durable 0.9%, capital goods and intermediate goods fell respectively 2.1% and 1.3%.
UK public sector net cash requirements was £22.9bn in Dec, a little lower than the expected £19.0bn and up from £10.6bn in Nov. Current budget deficit has improved from £12.4bn to £7.9bn last month.
UK public sector net borrowing ex-interventions fell to 13.7bn in Dec from £17.9bn last month. Net debt rose above £1trn - a record high representing 64.2% of GDP.
Market outlook
AUD/USD and NZD/USD outlook next 24 hours: Global markets will focus on the FOMC meeting 23 hours from now, and Australian CPI will attract market attention this afternoon. While AUD momentum slowed yesterday, it remains positive and targets 1.0600. NZD remains inside its upwards trend channel resistance defined by 0.7980 and 0.8160 today.
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 25 January 2012. All customers please note that this information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. Australian customers can obtain Westpac’s
financial services guide by calling +612 9284 8372, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without
notice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is registered in England as a branch (branch number BR000106) and is authorised and regulated by The Financial Services Authority. Westpac Europe Limited is a company registered in England (number 05660023) and is authorised and regulated by The Financial Services Authority. © 2010 Westpac Banking Corporation. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.
Market wrap
Risk sentiment fell in London and rose in NY for a small net loss. The S&P500 has recovered from -0.9% to 0.3% currently. The main drag on sentiment was the rejection by Eurozone finance ministers of the offer by Greek bondholders to swap old debt for new with a 4%+ coupon, the officials requiring a 3.5% starting coupon. A pre-London WSJ article that Portugal may require a second bailout and Standard & Poor’s downgrades of major French banks continued to weigh. The rating agency also commented the evolving Greek deal was likely to result in a selective default rating for the country. There was some offsetting positive news including Spain’s successful 3mth and 6mth bill auction, and above-consensus and improved Eurozone PMI’s. The CRB commodities index is up 0.2%, oil -1.0%, copper unchanged, and gold -0.7%. US 10yr treasury yields are 1bp higher at 2.06%, having ranged between 2.03% and 2.08% overnight. The 2yr auction went well with a 3.8 bid-cover ratio (12mth average is 3.4). Greek and Portuguese 10yr government bond yields fell by -20bp and -25bp respectively.
The US dollar index is little changed after gyrating inversely with risk sentiment overnight. EUR consolidated between 1.2955 and 1.3063. USD/JPY surged from 77.00 to 77.85 after the BOJ downgraded its growth outlook at its meeting. AUD extended its domestic session slide to 1.0428 before recovering in NY to 1.0483. NZD similarly recovered from a London low of 0.8056 to 0.8108. AUD/NZD fell from 1.2960 to 1.2930.
Economic wrap
US Richmond Fed factory index rose to a better than expected +12 (consensus +6) in Jan (from 3). The move to a 10-month high was led by an increase in shipments from +3 to +17 and the new orders index from +7 to +14.
CAN retail sales (MoM) rose 0.3% in Nov, the fourth positive print in a row. Sales increased to C$38.7bn mostly led by gasoline. There was an increase in seven out of the 11 major categories. Excluding autos and fuel, sales were up 0.2%.
Eurozone (flash estimate) PMI manufacturing rose slightly in Jan from 46.9 to 48.7. The second consecutive rise after seven declines, mainly driven by a strong German number (50.9 from 48.4), although offset slightly by a dip in France (48.5 from 48.9). The index, however, still remains below the key 50 level signalling a continued contraction in the manufacturing sector.
Eurozone (flash estimate) PMI services rose in Jan from 48.8 to 50.5. The survey has risen for three consecutive months and has moved back above 50 after four months of contraction (sub-50). The January breakdown revealed decent rebounds in both France (up to 51.7) and Germany (to 54.5).
Eurozone industrial new orders (MoM) fell 1.3% in Nov compared to a 1.5% rise in Oct (revised down from 1.8%). Although non-durable consumer goods rose 1.7% and durable 0.9%, capital goods and intermediate goods fell respectively 2.1% and 1.3%.
UK public sector net cash requirements was £22.9bn in Dec, a little lower than the expected £19.0bn and up from £10.6bn in Nov. Current budget deficit has improved from £12.4bn to £7.9bn last month.
UK public sector net borrowing ex-interventions fell to 13.7bn in Dec from £17.9bn last month. Net debt rose above £1trn - a record high representing 64.2% of GDP.
Market outlook
AUD/USD and NZD/USD outlook next 24 hours: Global markets will focus on the FOMC meeting 23 hours from now, and Australian CPI will attract market attention this afternoon. While AUD momentum slowed yesterday, it remains positive and targets 1.0600. NZD remains inside its upwards trend channel resistance defined by 0.7980 and 0.8160 today.
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 25 January 2012. All customers please note that this information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. Australian customers can obtain Westpac’s
financial services guide by calling +612 9284 8372, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without
notice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is registered in England as a branch (branch number BR000106) and is authorised and regulated by The Financial Services Authority. Westpac Europe Limited is a company registered in England (number 05660023) and is authorised and regulated by The Financial Services Authority. © 2010 Westpac Banking Corporation. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.
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