Monday 11 June 2012
Market wrap
Markets on Friday were optimistic a Spanish rescue was nearby, and they weren t disappointed. After months of official denials, on Sunday joined Spain, Ireland, Portugal, and Greece in the lists of Eurozone countries which have requested a financial rescue. The amount could be around EUR100bn and will target the ailing banking sector. The IMF will administer (but not contribute) to the aid which has much more lenient fiscal conditions attached than was the case for the other countries. China data released during the weekend was mixed, inflation, industrial production and retail sales "disappointing" but imports and exports rising sharply. The & P 500 closed up 0.8% in NY with much of that occurring during the last hour, and US treasury yields "10yr closed unchanged at 1.64%; both should open higher yesterday in response to the Spanish rescue.
The US dollar index (DXY) rose and fell around the London afternoon for little net change. The EUR fell from 1.2500 to 1.2436 and bounced to 1.2517 on waning and waxing and expectations regarding the timing of a Spanish rescue announcement. It opened this morning sharply higher around 1.2640 a two week high. USD/JPY bounced from 79.10 is 70.60 on Friday and is higher at 79.70 this morning. AUD made a 0.9822 intraday low early London, rising in NY to close on Friday at 0.9916. It opened this morning sharply higher, almost reaching parity (0.9988). NZD room similarly rose from 0.7619 is 0.7703 on Friday, and rose the 0.7765 early this morning. AUD/NZD fell from 1.2920 is 1.2860.
Economic wrap
US initial jobless claims fall 12 k to 377k last week, reversing most of the late May spike but still leaving in place a modest uptrend since mid February, used with the slower pace of jobs growth in recent months.
US Fed chairman Ben Bernanke testimony. The economy is at risk from Europe and the fiscal cliff embodied in current US policy unless Congress percentage, to legislate for a new tax/spending mix before the year is out. Yet again, Bernanke said he had the tools to provide further stimulus if needed but did not specify what they might be. With colleagues Janet Yellen and Denis Lockhart also musing about further easing there is clearly still a reasonable possibility of QE3 in some form, and that has been Westpac s forecast ever since QE2 was announced in late 2010.
Canada Ivey PMI jumps from 52.7 to 60.5 in May, recovering most of the April drop.
After long delays Spain requested EU aid to recapitalise its struggling banking system. European ministers have said they would be prepared to lend up to 100bn. Unlike Ireland s room similarly-focused bank bailout package, the money will be channelled directly to Spain s banks through its bank resolution fund, and conditions come in the form of "outside the bank supervision rather than new austerity measures. This is perhaps the most market-friendly of the plausible outcomes and a necessary shot in the arm for Spanish banks ahead of Greek elections, but it adds to the Spanish government s debt and so doesn t decisively break the bank debt/sovereign debt spiral.
The Bank of England on hold at 0.5% after this week s MPC meeting, and the asset purchase programme suspended for the second month at 325bn.
UK services PMI steady at 53.3 in May, still the equal softest reading for the year so far. The BRC reported same store sales up 1.3% yr in May, as the weather improved from miserable April when sales were down 3.3% yr. The Halifax reported house prices up 0.5% in May for a 0.1% yr annual pace, its least weak reading since late 2010.
Chinese data for May mostly came in below forecasts, providing retroactive justification for last week s interest rate cuts, the first since 2008. Consumer price inflation slowed from 3.4% to 3.0%, while producer prices were down 1.4% yr. Industrial production rose 9.5% yr, and pickup from April s 9.3% pace (which was probably affected by last year s Japanese tsunami), but fell short of the median forecast of 9.8%. Retail spending slowed from 14.1% yr is 13.8% yr. The exception was overseas trade, with exports (up 15.3% yr) and imports (12.7% yr) well ahead of forecasts and April s very weak results. New loans and money supply figures due this week are expected to show a small uptick from April.
Market outlook
AUD and NZD Outlooks: The primary dynamic driving markets today will be the weekend s Spanish bailout news and positive for the currencies. Trading conditions will be thin until Asia opens with Australia on holiday.
NZD/USD 1 day: This corrective rally can push the 0.7810-0.7850 area.
NZD/USD 1 month: Below 0.7300.
NZ 2yr swap yield: Opening today above 2.60%.
AUD/USD 1 day: The corrective rally since 1 June will probably extend further during the next day or two to above 1.0000.
AUD/USD 1 month: Below 0.9500.
Westpac Banking Corporation ABN 33 007 457 141, incorporated in Australia (NZ division). Information current as at 11 June 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 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. the 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 model on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions model or by known or unknown risks and uncertainties. The ultimate outcomesof the forex blog page you will find the latest forex trading information. Scroll down the page if you are looking for less recent currency trading information. Scroll to the bottom of the fx blog headlines and click on the link for past reports on forex. Currency world news reports from previous years can be found on the left sidebar under "FX Archives."
Market wrap
Markets on Friday were optimistic a Spanish rescue was nearby, and they weren t disappointed. After months of official denials, on Sunday joined Spain, Ireland, Portugal, and Greece in the lists of Eurozone countries which have requested a financial rescue. The amount could be around EUR100bn and will target the ailing banking sector. The IMF will administer (but not contribute) to the aid which has much more lenient fiscal conditions attached than was the case for the other countries. China data released during the weekend was mixed, inflation, industrial production and retail sales "disappointing" but imports and exports rising sharply. The & P 500 closed up 0.8% in NY with much of that occurring during the last hour, and US treasury yields "10yr closed unchanged at 1.64%; both should open higher yesterday in response to the Spanish rescue.
The US dollar index (DXY) rose and fell around the London afternoon for little net change. The EUR fell from 1.2500 to 1.2436 and bounced to 1.2517 on waning and waxing and expectations regarding the timing of a Spanish rescue announcement. It opened this morning sharply higher around 1.2640 a two week high. USD/JPY bounced from 79.10 is 70.60 on Friday and is higher at 79.70 this morning. AUD made a 0.9822 intraday low early London, rising in NY to close on Friday at 0.9916. It opened this morning sharply higher, almost reaching parity (0.9988). NZD room similarly rose from 0.7619 is 0.7703 on Friday, and rose the 0.7765 early this morning. AUD/NZD fell from 1.2920 is 1.2860.
Economic wrap
US initial jobless claims fall 12 k to 377k last week, reversing most of the late May spike but still leaving in place a modest uptrend since mid February, used with the slower pace of jobs growth in recent months.
US Fed chairman Ben Bernanke testimony. The economy is at risk from Europe and the fiscal cliff embodied in current US policy unless Congress percentage, to legislate for a new tax/spending mix before the year is out. Yet again, Bernanke said he had the tools to provide further stimulus if needed but did not specify what they might be. With colleagues Janet Yellen and Denis Lockhart also musing about further easing there is clearly still a reasonable possibility of QE3 in some form, and that has been Westpac s forecast ever since QE2 was announced in late 2010.
Canada Ivey PMI jumps from 52.7 to 60.5 in May, recovering most of the April drop.
After long delays Spain requested EU aid to recapitalise its struggling banking system. European ministers have said they would be prepared to lend up to 100bn. Unlike Ireland s room similarly-focused bank bailout package, the money will be channelled directly to Spain s banks through its bank resolution fund, and conditions come in the form of "outside the bank supervision rather than new austerity measures. This is perhaps the most market-friendly of the plausible outcomes and a necessary shot in the arm for Spanish banks ahead of Greek elections, but it adds to the Spanish government s debt and so doesn t decisively break the bank debt/sovereign debt spiral.
The Bank of England on hold at 0.5% after this week s MPC meeting, and the asset purchase programme suspended for the second month at 325bn.
UK services PMI steady at 53.3 in May, still the equal softest reading for the year so far. The BRC reported same store sales up 1.3% yr in May, as the weather improved from miserable April when sales were down 3.3% yr. The Halifax reported house prices up 0.5% in May for a 0.1% yr annual pace, its least weak reading since late 2010.
Chinese data for May mostly came in below forecasts, providing retroactive justification for last week s interest rate cuts, the first since 2008. Consumer price inflation slowed from 3.4% to 3.0%, while producer prices were down 1.4% yr. Industrial production rose 9.5% yr, and pickup from April s 9.3% pace (which was probably affected by last year s Japanese tsunami), but fell short of the median forecast of 9.8%. Retail spending slowed from 14.1% yr is 13.8% yr. The exception was overseas trade, with exports (up 15.3% yr) and imports (12.7% yr) well ahead of forecasts and April s very weak results. New loans and money supply figures due this week are expected to show a small uptick from April.
Market outlook
AUD and NZD Outlooks: The primary dynamic driving markets today will be the weekend s Spanish bailout news and positive for the currencies. Trading conditions will be thin until Asia opens with Australia on holiday.
NZD/USD 1 day: This corrective rally can push the 0.7810-0.7850 area.
NZD/USD 1 month: Below 0.7300.
NZ 2yr swap yield: Opening today above 2.60%.
AUD/USD 1 day: The corrective rally since 1 June will probably extend further during the next day or two to above 1.0000.
AUD/USD 1 month: Below 0.9500.
Westpac Banking Corporation ABN 33 007 457 141, incorporated in Australia (NZ division). Information current as at 11 June 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 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. the 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 model on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions model or by known or unknown risks and uncertainties. The ultimate outcomesof the forex blog page you will find the latest forex trading information. Scroll down the page if you are looking for less recent currency trading information. Scroll to the bottom of the fx blog headlines and click on the link for past reports on forex. Currency world news reports from previous years can be found on the left sidebar under "FX Archives."
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