Morning Report Monday 12 March 2012 Market wrap
Positive news and stronger US dollar. Early London saw the expected announcement that the Greek debt swap had been completed, 86% (EUR152bn) of Greek-law bondholders agreeing to a write-down in exchange for new bonds. The remainder will be forced to accept the swap, removing the risk of a disorderly default and paving the way for disbursements from the second rescue package. The outcome was largely priced in and markets seemed unfazed. Markets were more interested in the US payrolls report which delivered a positive surprise. US equities rose slightly (S&P500 closed up 0.4%) but the US dollar rose significantly, upsetting the post-GFC relationship whereby the US dollar benefitted from risk aversion. Near the NY close, the derivatives body ISDA ruled a Greek credit event had occurred, hurting risk sentiment slightly. US 10yr treasury yields closed 2bp higher at 2.03%, earlier threatening to break a multi-month range by touching 2.06%.
The US dollar index (DXY) is around 1.1% higher, surging 0.7% on the payrolls event alone. EUR fell throughout the evening, from 1.3260 to 1.3201 pre-payrolls, and then to 1.3097. USD/JPY rose from 81.47 to 82.65 – an April 2011 high. AUD suffered from USD strength, briefly interpreting a strong payrolls report by popping to 1.0647 but reversing within minutes to reach 1.0565 near the close. It opens this morning at 1.0560. NZD fell from 0.8255 to 0.8193. AUD/NZD rose from 1.2880 to 1.2920 pre-payrolls, falling to 1.2860 afterwards. Both the AUD and NZD long speculative futures positions were unwound further last week.
Economic wrap
US non-farm payrolls up 227k in Feb. Solid Feb jobs growth came on top of 61k upward revisions to Dec and Jan. Three month average jobs growth of 245k in Dec-Feb is stronger than the 239k average recorded in Feb-Apr last year (which proved unsustainable as the economy lost momentum in H1 2011) and in fact was the strongest since a 294k monthly average recorded through Q1 2006. Also the separate household survey posted a rare 8th straight gain in employment: there has not been a longer run of positives since at least the turn of the century. One soft spot: the detail showed declines in construction and retail jobs, the latter down for the first month since March last year. But factory jobs were very solid, up 31k on top of 80k in Dec-Jan, the strongest string of gains in that sector since Q1 last year. Hourly earnings growth of 0.1% (for the 4th month running) and hours worked growth of 0.2% point to moderate household income growth in Feb, the same as in Nov and Jan but slower than in Dec when hours worked were up 0.5%. The jobless rate was steady at 8.3% in Feb its first month without a decline since Aug last year, as rising labour market participation more or less matched the increase in jobs. US trade deficit widens $2.1bn in Jan to $52.6bn. Exports rose 1.4% with capital goods and autos rising to record levels by value, but imports were up for the third month running, by 2.1%. Other data included a 0.4% rise in wholesale inventories in Jan.
Canadian employment down 3k in Feb. The level of employment peaked in Sep last year and in Feb was down around 37k from the peak. However the jobless rate dipped 0.2 ppts to 7.4%, its first decline since Sep, as labour market participation fell more than jobs. Canadian trade surplus C$2.1bn in Jan, down from C$2.9bn in Dec but the first back to back surpluses since Dec-Jan a year ago. In Jan exports fell 2.3% while imports slipped 0.6%. Other data included a Q4 labour productivity rise of 0.7%, up from 0.6% in Q3.
Greek bailout mk 2 approved. With 85% of creditors holding bonds issued under Greek law agreeing to the bond swap deal which will see them wear a 70+% haircut in net present value terms, collective action clauses mean another 10% of creditors will be forced to accept the deal. Consequently, EU finance ministers signed off on the additional €130bn Greek bailout package that was conditional on the bond swap going ahead. But on our (lack of) growth view, within months it should be clear that Greece is once again missing its deficit reduction targets, requiring yet another bailout/more debt forgiveness.
German exports up 2.3% in Jan, after falling 4.4% in Dec ( a similar pattern to German IP up 1.6% in Jan after a 2.6% Dec fall).
UK industrial production down 0.4% in Jan, with a 0.1% factory output rise offset by falling mining and utility output. Meanwhile producer prices accelerated from 2.4% yr to 3.0% yr in Feb (core output), with the PPI input and output measures both higher in the month.
Market outlook
AUD/USD and NZD/USD outlook next 24 hours: The local event calendars are quiet today (possibly NZ housing data). In the absence of shocks today, USD strength should weigh on the local currencies. AUD should slip further today to 1.0550 next then 1.0510. NZD should head towards 0.8150.
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 12 March 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’sfinancial 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 withoutnotice 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.
Positive news and stronger US dollar. Early London saw the expected announcement that the Greek debt swap had been completed, 86% (EUR152bn) of Greek-law bondholders agreeing to a write-down in exchange for new bonds. The remainder will be forced to accept the swap, removing the risk of a disorderly default and paving the way for disbursements from the second rescue package. The outcome was largely priced in and markets seemed unfazed. Markets were more interested in the US payrolls report which delivered a positive surprise. US equities rose slightly (S&P500 closed up 0.4%) but the US dollar rose significantly, upsetting the post-GFC relationship whereby the US dollar benefitted from risk aversion. Near the NY close, the derivatives body ISDA ruled a Greek credit event had occurred, hurting risk sentiment slightly. US 10yr treasury yields closed 2bp higher at 2.03%, earlier threatening to break a multi-month range by touching 2.06%.
The US dollar index (DXY) is around 1.1% higher, surging 0.7% on the payrolls event alone. EUR fell throughout the evening, from 1.3260 to 1.3201 pre-payrolls, and then to 1.3097. USD/JPY rose from 81.47 to 82.65 – an April 2011 high. AUD suffered from USD strength, briefly interpreting a strong payrolls report by popping to 1.0647 but reversing within minutes to reach 1.0565 near the close. It opens this morning at 1.0560. NZD fell from 0.8255 to 0.8193. AUD/NZD rose from 1.2880 to 1.2920 pre-payrolls, falling to 1.2860 afterwards. Both the AUD and NZD long speculative futures positions were unwound further last week.
Economic wrap
US non-farm payrolls up 227k in Feb. Solid Feb jobs growth came on top of 61k upward revisions to Dec and Jan. Three month average jobs growth of 245k in Dec-Feb is stronger than the 239k average recorded in Feb-Apr last year (which proved unsustainable as the economy lost momentum in H1 2011) and in fact was the strongest since a 294k monthly average recorded through Q1 2006. Also the separate household survey posted a rare 8th straight gain in employment: there has not been a longer run of positives since at least the turn of the century. One soft spot: the detail showed declines in construction and retail jobs, the latter down for the first month since March last year. But factory jobs were very solid, up 31k on top of 80k in Dec-Jan, the strongest string of gains in that sector since Q1 last year. Hourly earnings growth of 0.1% (for the 4th month running) and hours worked growth of 0.2% point to moderate household income growth in Feb, the same as in Nov and Jan but slower than in Dec when hours worked were up 0.5%. The jobless rate was steady at 8.3% in Feb its first month without a decline since Aug last year, as rising labour market participation more or less matched the increase in jobs. US trade deficit widens $2.1bn in Jan to $52.6bn. Exports rose 1.4% with capital goods and autos rising to record levels by value, but imports were up for the third month running, by 2.1%. Other data included a 0.4% rise in wholesale inventories in Jan.
Canadian employment down 3k in Feb. The level of employment peaked in Sep last year and in Feb was down around 37k from the peak. However the jobless rate dipped 0.2 ppts to 7.4%, its first decline since Sep, as labour market participation fell more than jobs. Canadian trade surplus C$2.1bn in Jan, down from C$2.9bn in Dec but the first back to back surpluses since Dec-Jan a year ago. In Jan exports fell 2.3% while imports slipped 0.6%. Other data included a Q4 labour productivity rise of 0.7%, up from 0.6% in Q3.
Greek bailout mk 2 approved. With 85% of creditors holding bonds issued under Greek law agreeing to the bond swap deal which will see them wear a 70+% haircut in net present value terms, collective action clauses mean another 10% of creditors will be forced to accept the deal. Consequently, EU finance ministers signed off on the additional €130bn Greek bailout package that was conditional on the bond swap going ahead. But on our (lack of) growth view, within months it should be clear that Greece is once again missing its deficit reduction targets, requiring yet another bailout/more debt forgiveness.
German exports up 2.3% in Jan, after falling 4.4% in Dec ( a similar pattern to German IP up 1.6% in Jan after a 2.6% Dec fall).
UK industrial production down 0.4% in Jan, with a 0.1% factory output rise offset by falling mining and utility output. Meanwhile producer prices accelerated from 2.4% yr to 3.0% yr in Feb (core output), with the PPI input and output measures both higher in the month.
Market outlook
AUD/USD and NZD/USD outlook next 24 hours: The local event calendars are quiet today (possibly NZ housing data). In the absence of shocks today, USD strength should weigh on the local currencies. AUD should slip further today to 1.0550 next then 1.0510. NZD should head towards 0.8150.
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 12 March 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’sfinancial 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 withoutnotice 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.
No comments:
Post a Comment