EU Market Update: Major European PMI Manufacturing data misses expectations; German IFO Business Confidence falls for the first time in 7 months

Thursday, May 24, 2012 5:41:17 AM TradeTheNews.com EU Market Update: Major European PMI Manufacturing data misses expectations; German IFO Business Confidence falls for the first time in 7 months***Economic Data***
- (RU) Russia Gold & Forex Reserve w/e May 18th: $514.3B v $518.8B prior
- (DE) Germany Q1 Final GDP Q/Q: 0.5% v 0.5%e; Y/Y: 1.7% v 1.7%e; GDP WDA Y/Y: 1.2% v 1.2%e
- (DE) Germany Q1 Private Consumption: 0.4% v 0.2%e; Government Spending: 0.2% v 0.3%e; Domestic Demand: -0.3% v 0.0%e; Capital Investment: -1.1% v -0.3%e; Construction Investment: -1.3% v -0.4%e; Exports: 1.7% v 0.9%e; Imports: 0.0% v 0.3%e
- (CH) Swiss Apr Trade Balance (CHG): 1.3B v 1.9Be; Real Exports M/M: -0.9% v +0.2%e; Real Imports M/M: 2.6% v 5.9% prior
- (FI) Finland Apr PPI M/M: -0.1% v +0.4% prior; Y/Y: 1.4% v 1.4% prior
- (FI) Finland Apr Preliminary Retail Sales Volume Y/Y: -2.0% v +5.3% prior
- (FR) France May Business Confidence: 93 v 94e; Production Outlook: -29 v -14 prior; Own-Company Production Outlook: -4 v -4 prior
- (FR) France May Preliminary PMI Manufacturing: 44.4 v 47.0e; PMI Services: 45.2 v 45.7e
- (CZ) Czech May Business Confidence: 6.0 v 7.5 prior; Consumer Confidence: -31.0 v -29.3 prior; Composite: -1.4 v +0.2 prior
- (HU) Hungary Mar Retail Trade Y/Y: +0.9% v -0.8%e
- (ES) Spain Mar Mortgages-capital loaned Y/Y: -41.5% v -49.6% prior; Mortgages on Houses Y/Y: -42.0 v -47.1% prior
- (DE) Germany May Advanced PMI Manufacturing: 45.0 v 47.0e (fastest rate of contraction since June 2009); PMI Services: 52.2 v 52.0e
- (NL) Netherlands Apr Unemployment Rate: 6.2 v 5.9% prior
- (NL) Netherlands May Producer Confidence: -5.0 v -3.3 prior
- (EU) Euro Zone May Advanced PMI Manufacturing: 45.0 v 46.0e (lowest reading since June 2009); PMI Services: 46.5 v 46.7e; PMI Composite: 45.9 v 46.6e
- (DE) Germany May IFO Business Climate: 106.9 v 109.4e (first MoM decline in 7 months); Current Assessment: 113.3 v 117.1e; Expectations Survey: 100.9 v 102.0e
- (UK) Q1 Preliminary GDP (Second reading) Q/Q: -0.3% v -0.2%e; Y/Y: -0.1% v 0.0%e
- (UK) Q1 Preliminary Private Consumption: 0.1% v 0.3%e; Government Spending: 1.6% v 0.0%e; Gross Fixed Capital Formation: -0.3% v -0.5%e; Exports: +0.1% v -0.3%e; Imports: 0.4% v 0.1%e
- (UK) Q1 Preliminary Total Business Investment Q/Q: +3.6% v -1.0%e; Y/Y: 14.2% v 9.2%e
- (UK) Mar Index of Services M/M: 0.5% v 0.3%e; 3M/3M: 0.1% v 0.2%e
- (UK) Apr BBA Loans for House Purchase: 32.4K v 32.0Ke
- (HK) Hong Kong Apr Trade Balance (HKD): -42.9B v -40.8Be; Exports Y/Y: 5.6% v 6.2%e; Imports Y/Y: 5.0% v 4.1%e
- (IC) Iceland May CPI M/M: 0.0% v 0.8% prior; Y/Y: 5.4% v 6.4% prior
Fixed Income
- (DK) Denmark sold approx DKK6.0B in I/L 2023 Bonds; Yield -0.14%, bid-to-cover: 1.78x
- (HU) Hungary Debt Agency (AKK) sold HUF50B v HUF45B indicated in 12-Month Bills; Avg yield 7.58% v 7.38% prior; Bid-to-cover: 1.81x v 2.12x prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- China May HSBC Flash Manufacturing PMI registers its 7th consecutive contraction
- Major European PMI Manufacturing miss market expectations
- German IFO falls for the first time in 7 months
- UK Q1 GDP second reading revised slightly lower
- Speculation rising of a EU wide deposit guarantee plan to be endorsed by German Chancellor Merkel
- EU growth initiatives will be announced in June, but without abandoning fiscal prudence
***Equities*** >Indices: FTSE 100 +0.80% at 5306, DAX +0.30% at 6301, CAC-40 +0.60% at 3021, IBEX-35 +0.60% at 6481, FTSE MIB +0.75% at 13,057, SMI +0.40% at 5841
- In Europe, equities opened the session broadly higher amid gains in banks. However, markets have since pared gains following the release of weaker than expected EU manufacturing PMI and German IFO data. Additionally, the decline in China's May flash manufacturing PMI has weighed on markets. In terms of upcoming event risks, durable goods and weekly jobless claims data are due out of the US later today. Also, commentary is expected later today from the German Finance Minister Schaeuble, ECB's Prsident Draghi, Fed official Dudley and ECB/Bundesbank official Asmussen.
- In the UK shares of Mothercare [MTC.UK] and Cable & Wireless Communications [CWC.UK] have both traded sharply higher after releasing their respective full year earnings reports. Additionally, Thomas Cook [TCG.UK] has gained more than 5%, after naming a new CEO. SABMiller [SAB.UK] has moved between slight gains and losses, following the release of its full year earnings report. In Spain, Bankia is trading lower by approx. 1%, as Spain's government said the firm will require about ?7.1B to comply with the country's provisioning rules. Austrian bank, Raiffeisen [RIBH.AT] has gained over 1% after reporting higher than expected Q1 earnings. In Germany, sharers of SAP [SAP.DE] and Metro [MEO.DE] have been weighed down by ex-dividend factors. Bayer [BAYN.DE] has lost approx. 1.5%, as a US FDA panel voted against recommending XARELTO as a treatment for acute coronary syndrome.
Speakers: >- German IFO Economists commented that uncertainty in Euro Zone was impacting Germany's economy, but outlook remained above its long-term avg
- ECB's Nowotny: ECB has not used its whole arsenal and reiterated that non-standard ECB measures should not endanger mid-term price stability. The situation in Greece was particularly acute and overcoming imbalances was essential but would take time
- Bank of Japan (BOJ) Monthly Economic Report maintained its overall assessment of the economy that it would return to moderate recovery path
- Japan BOJ Gov Shirakawa commented ion Parliament that distrust in fiscal reform could push up long-term interest rates and weigh upon earnings of financial companies. He reiterated view that BOJ would pursue powerful easing. Risk aversion was the biggest factor in recent FX price movements. He added that there was no clear correlation historically between monetary base and JPY currency movement. The BOJ would strive to beat deflation using current asset buying program
- IMF China representative stated that a Greek exit from EMU would be a big shock to Chinese exports but China has fiscal room to sustain growth in the face of crisis
- BoE official Bailey stated that the UK banking sector's contingency plan for potential Greek exit from euro becoming more detailed
- Finland Fin Min Urpilainen commented that Europe's challenge was to find economic growth. Collateral payment from Greece rose to ?560M
- Ireland Dep PM Gilmore stated that categorically treaty would not be changed and reiterated the view that it wanted Greece to stay inside the EMU. Lastly he added that Ireland did not have contingency plan for a Greek exit.
- Sweden FSA's Cerps stated that the agency was monitoring banking sector to USD funding as Euro crisis deepens
- Poland Dep Fin Min Radziwill commented that the PLN currency was relatively stable with its weakness related to the Euro crisis. Poland currency sales would be similar to 2011 levels. He noted that debt markets were difficult at this time but would return to the market after it stabilizes as the country is in a comfortable situation. Domestic sales were seen covering most remaining needs for 2012
- Hong Kong Chief Executive Leung stated that it would seek stronger economic growth by diversification
- India Finance Ministry Official noted that the Gov't committee to meet on Friday to discuss raising diesel prices
- Philippines Central Bank Assistant Gov Amador commented that it would review CPI forecasts at June policy meeting and saw Inflation at a manageable as lower oil costs dampened pressures. To consider global economy and Euro Zone crisis during policy meeting and added the central bank would moderate sharp volatility in FX rates
- Indonesia Finance Ministry unveiled its mineral export tax regulation
- Iran official stated that there was no basis for new round of UN Counsel (P5+1) discussions
Currencies:
- The Euro initially tried to correct oversold levels but risk aversion sentiment again maintained the upper hand throughout the bulk of the European morning. Following China's lead, the European major PMI Manufacturing data came in softer than expectations and provided further headwinds for the Euro. Citigroup analyst added to sentiment when it issued a note forecasting ECB refi rate being cut to 0.50% and the central bank to resume its 3-year lending LTRO following any Greek exit from EMU. The EUR/USD approached the 1.2500 level for 22-month lows which provided some technical and psychological support. One analyst noted that 1.2530 level was 78.6% retracement of its 2010-2011 move.
-The hour ahead of the NY morning the markets encountered a bit of a reversal as European equity markets moved back into positive territory and peripheral spreads narrowed. The record low yields of safe-haven plays seemed to have ignited some asset reallocation back into equities. The EUR/USD was back around the 1.2560 area as the NY morning approached
- The EUR/CHF cross floor at 1.200 continued to note a 'massive' bid in its defense.
Political/ In the Papers:
- The Spanish government was said to be planning to nationalize CatalunyaCaixa and NovaGalicia banks due to the inability to find a buyer. Prior reports from late March suggested that the auction process for the banks would be slowed by Spain's government, as Spain's Deposit Guarantee Fund (DGF) needed to be strengthened. At that time it was estimated that the DGF had about ?2.0B in funds.
- Plans by the government to delay certain privatizations related to the energy industry have weighed on Russia's equity markets. On Wednesday, Russia's benchmark RTS index declined by 4.4%.
- The Telegraph's Ambrose Evans-Pritchard is critical of former Greek caretaker PM Papademos. He argued If Greece were to leave the Euro, then its fate would not have to be as dire as the situation recently described by Papademos. It could restructure its economy in a similar manner to Iceland.
- According to the FT US manufacturers argued against plans by JP Morgan to launch an exchange traded fund backed by copper as it would grossly and artificially inflate prices, and cause wreak havoc on the global economy.
***Looking Ahead*** >- (ZA) South Africa Central Bank (SARB) Interest Rate Decision: Expected to leave interest rates unchanged at 5.50%
- (AR Argentina May Consumer Confidence:
- 6:00 (IR) Ireland Apr Property Prices M/M: No est v 0.0% prior; Y/Y: No est v -16.2%e
- 6:00 (CZ) Czech Republic to sell 9-month Bills
- 7:15 (UK) BOE member Miles
- 7:30 (DE) German Fin Min Schaeuble
- 7:30 (TR) Turkey May Industrial Confidence: No est v 116 prior; Capacity Utilization: No est v 74.7% prior
- 8:00 (ZA) South Africa Central Bank Gov Marcus Rate Decision press conference
- 8:00 (BR) Brazil Apr Unemployment Rate: 6.2%e v 6.2% prior
- 8:00 (RO) Romania to sell RON500M in Bonds
- 8:30 (US) Apr Durable Goods Orders: +0.2%e v -4.0% prior (revised from -4.20%); Durables Ex Transportation: +0.8%e v -0.8% prior (revised from -1.1%); Capital Goods Orders Non-defense Ex-Aircraft: 0.8%e v -0.8% prior; Capital Goods Shipment Non-defense Ex-Aircraft: -1.0%e v +2.6% prior
- 8:30 (US) Initial Jobless Claims: 370Ke v 370K prior; Continuing Claims: 3.250Me v 3.265M prior
- 8:58 (US) May Preliminary Markit PMI:
- 9:00 (IT) Italy PM Monti
- 9:00 (EU) ECB's Draghi, Bank of Italy's Visco speak at Rome Conference
- 9:00 (DE) German Chancellor Merkel speaks at German Engineering Industry Convention
- 9:00 (BE) Belgium May Business Confidence: -11e v -10.7 prior
- 9:00 (MX) Mexico Q1 GDP Y/Y: No est v 11.0% prior
- 9:30 (DE) Germany Econ Min Roesler
- 9:30 (US) Fed's Dudley to speak on Regional Economy in New York
- 9:30 (EU) EFSF CFO Frankel in Rome
- 9:30 (BR) Brazil Apr Current Account: -$4.0Be v -$3.3B prior; Foreign Direct Investment (FDI): $4.9Be v $5.9B prior
- 9:30 (US) Commercial Paper data
- 10:30 (US) EIA Natural Gas Inventories
- 11:00 (US) May Kansas City Fed Manufacturing Activity: 5 v 3 prior
- 12:20 (DE) ECB member Asmussen in Poland
- 15:00 (AR) Argentina Apr Industrial Production M/M: No est v 1.9% prior; Y/Y: 1.5%e v 2.1% prior
- 19:30 (JP) Japan Apr National CPI Y/Y: No est v 0.5% prior; Ex-Food Y/Y: No est v -0.5% prior
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Asian Market Update: China trade data misses expectations, Australia records 1-yr low for "unemployment Have Market Intel?

CHINA APR TRADE BALANCE: $18.42B V $9.9BE >- (AU) AUSTRALIA APR UNEMPLOYMENT RATE: 4.9% V 5.3%E (1-yr low); EMPLOYMENT CHANGE: 15.5K V -5.0KE (2nd consecutive increase); PARTICIPATION RATE: 65.2% V 65.4%E
- (KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 3.25%; AS EXPECTED
- (JP) JAPAN MAR CURRENT ACCOUNT TOTAL: ¥1.59T V ¥1.4TE; ADJUSTED CURRENT ACCOUNT TOTAL: ¥785.5B V ¥647BE; CURRENT ACCOUNT BALANCE Y/Y: -8.6% V -17.1%E; TRADE BALANCE: ¥4.2B V -¥43BE
- (NZ) NEW ZEALAND APR BUSINESS NZ PMI: 48.0 V 53.8 PRIOR
- (PH) PHILIPPINES MAR TOTAL EXPORTS: -1.2% V 11.0%E; TOTAL MONTHLY EXPORTS: $4.3B V $4.4B PRIOR
- (NZ) NEW ZEALAND APR QV HOUSE PRICES Y/Y: 3.1% V 3.0% PRIOR
- (JP) JAPAN APR BANK LENDING INCLUDING TRUSTS Y/Y: 0.3% V 0.8% PRIOR; BANK LENDING EX-TRUSTS Y/Y: 0.4% V 0.9% PRIOR
- (JP) JAPAN APR BANKRUPTCIES Y/Y: -7.5% V -1.9% PRIOR
- (JP) JAPAN APR ECO WATCHERS CURRENT SURVEY: 50.9 V 51.8 PRIOR; OUTLOOK: 50.9 V 49.7 PRIOR
- (MA) MALAYSIA MAR INDUSTRIAL PRODUCTION Y/Y: 0.6% V 3.3%E; MANUFACTURING SALES VALUE Y/Y: 3.1% V 12.1% PRIOR
- (JP) JAPAN APR TOKYO AVERAGE OFFICE VACANCIES Y/Y: 9.2% V 9.0% PRIOR
- (JP) Japan investors bought ¥56B in foreign bonds last week v ¥1.2T sold in prior week
- (CO) Colombia Mar Exports: $5.69B v $4.8B prior
***Markets Snapshot (as of 04:30GMT)***
- Nikkei225 -0.1%
- S&P/ASX +0.1%
- Kospi -0.1%
- Taiwan Taiex +0.2%
- Singapore Straits Times Index -0.2%
- Shanghai Composite -0.2%
- Hang Seng -0.9%
- Jun S&P Futures +0.2% at 1,353
- June gold unchanged at $1,594/oz
- June Crude -0.2% at $96.57
***Overview/Top Headlines***
- Focus remains on European uncertainty. Bank of Korea after leaving rates unchanged mentioned it remains one of the top risks, noting that it thinks the EU is in a mild recession but not expected to get worse. China remained cautious with its yuan setting and it expected to continue to do so until the latest storm blows over. According to China Investment Corp President Gao, China sovereign wealth fund has stopped buying European government sovereign debt. Late in the US session, the Fed gave Chinese banks ICBC, Bank of China and Agricultural Bank of China approval to expand into the US market. Crude was weaker, Brent crude rose to $113.20, corn gained over 1% while wheat fell nearly 3% to $5.91 ahead of U.S. Department of Agriculture supply-demand report.
- Australia recorded a lower than expected unemployment rate at 4.9% in April, a 1-year low. Employment change rose for the second consecutive month. The news drove the AUD/USD higher above $1.0115, but will make an argument not to cut rates at the next RBA meeting. Full time jobs lost 10,500, however part time jobs added 26,000 close to March levels. Strength in the jobs market is mostly attributed to the mining boom and the huge investments from the major miners into expanding capacity to meet demand from India and China. Australia 10-year yields around 3.321% after the data.
- China April trade balance came in at a surplus of $18.4B, much higher than expected, exports at 4.9% were weaker than expected, imports rose only 0.3%. Some of the export weakness is attributed to the lack of recovery from European demand. China has increased its calls for the US to ease restriction on high tech exports in recent weeks in order to help imbalances. The yuan fell for a fifth consecutive day after a weaker setting by the PBoC. Shanghai Composite and Hang Seng both declined, iron ore imports say a huge fall off to 57.7M tons, -8% m/m, copper imports also fell 8% m/m, this sent the S&P ASX back towards unchanged territory after rebounding from employment data. Miners in Australia pared back some of their earlier gains as well. Surprisingly copper futures held on to their gains.
***Speakers/Geopolitical/In the press***
- (JP) BoJ's Shirai: Japan economic activity is more or less flat though there are indications of improvement
- (HK) Hong Kong govt may increase public housing rent by 10% - HK press
- (KS) South Korea Finance Min Bahk: Recent Won's moves not a concern, as the currency has been moving in a limited range
***Equities***
- Hynix, 000660.KR: Creditors planning to sell half of their 6.4% stake in the company, worth KRW576B - Korean press
- CHU: Expects 3G users to reach 90M by the end of 2012; Sees 3G rev at CNY70B v CNY40B in 2011
- RIO: CEO: Affirms it is more confident out its outlook than 6-months ago; Tackling rising costs, especially in Queensland is challenging - AGM
- STEL.SG: Reports FY12 Net S$3.99B v S$3.8B y/y; Rev S$18.8B v S$18.07B y/y
- ORG.AU: In talks with the United States' Export-Import Bank to acquire A$2.93 B in financing to help fund $6.0B expansion of Australia Liquefied natural gas facility in Gladstone - The Australian
***Fixed Income/Commodities/Forex***
- USD/INR: India Central Bank (RBI) fixes intra-day open position limit in forex at 5-times available limit; Only applies to rupee trades
- (CN) PBoC sells CNY24B in 7-day reverse repos at 3.30% v 3.53% on May 2nd

$ Dollar Misses Out on Another Opportunity to Gain Traction

Dollar Misses Out on Another Opportunity to Gain Traction Euro: A Jumpy Market Awaits Spain’s 10 Year Bond Auction British Pound Rallies after the BoE’s Most Ardent Dove Relents New Zealand Dollar Doesn’t Follow in the Aussie Footsteps with Rate Outlook Japanese Yen Slides as Deficit Balloons, Rate Outlook May See a Boost Swiss Franc Marks its Biggest Drop in a Week after Jordan Confirmed Gold Slides for Fourth Day but Progress is Lacking Dollar Misses Out on Another Opportunity to Gain Traction

There are two things that the dollar truly benefits from: fear and volatility in the broader financial markets. The impetus on both accounts was rather week this past trading session; and therefore, the dollar’s activity was unsurprisingly mute. For fear, we are referring to risk aversion or deleveraging. The benchmark S&P 500 was little moved Wednesday after the previous session’s impressive rally – the second largest this year. For contrast, carry trade interest is moderated and the CRB commodities index hit a new low for the year. Simple risk aversion doesn’t necessarily pique the dollar’s interest either. We need some sense of panic to really bolster the currency’s safe haven value. On that front, volatility indexes for equities (VIX), currencies and Treasuries have all eased. Without risk trends, little gain really rouse the greenback.

Euro: A Jumpy Market Awaits Spain’s 10 Year Bond Auction

Scrutiny over the euro’s health continues to intensify even as its short-term volatility ebbs. With a more focused market, the threat of a dramatic reaction to any meaningful fundamental shift hits dangerous levels. That presents the perfect opportunity for volatilty traders tomorrow as consistent muckraking over Spain’s financial trouble leaves us face-to-face with the highly anticipated 10-year (2022) Spanish government bond auction. Why is this particular event so important? Back on April 4th, the country sold debt across three maturities. The government expected to raise between €2.5 and €3.5 billion in capital from the market. The total raised barely met the minimum at €2.6 billion and drew significantly higher rates. This was as close to a failure as any major auction has come recently and sentiment surrounding the Euro Zone’s fourth largest economy has deteriorated considerably since then.

A few highlights from just this past trading session gives us a sense of just how dour the outlook for Spain and the euro happens to be at the moment. According to the Bank of Spain, the region’s non-performing bank loans in February reportedly surged to €143.8 billion or 8.2 percent of total lending – the highest percentage since 1994. This reflects the fragile state of the region’s banking sector. The end game, however, is whether the country will be forced to ask for a bailout like Greece, Ireland and Portugal before it. As with those other troubled members, the focus will be on the 10-year yield in the secondary market. Seven percent is the magic number.

With that benchmark in mind, though, it is worth noting that the yield has dropped the past two days even as the assessment of expected fallout worsened the nation’s benchmark equity index (the IBEX 35) crashed to a three-year low. This could be the reflection of a thin market, local banks buying sovereign debt to encourage stability or perhaps even the ECB at work (though there has been no talk to that). If we are to make progress on the next crisis wave (which Rajoy says we are seeing), a disappointment is needed here. Otherwise it’s onto the French election.

British Pound Rallies after the BoE’s Most Ardent Dove Relents

Heading into Wednesday’s London session, my expectations for UK data were low. Not that they would disappoint, rather they wouldn’t encourage much in the way of activity. I was proven wrong. The data expected to be more influential – the March labor data – was hardly market moving with a smaller than expected jump in claims and downtick in the jobless rate from a 16-year high. What was truly surprising was the content of the Bank of England minutes. An 8-1 vote to keep the asset purchasing program unchanged meant that perennial dove Adam Posen decided to back off his bid for more stimulus. That is a meaningful shift and suggests the MPC may be making a permanent shift to neutral.

New Zealand Dollar Doesn’t Follow in the Aussie Footsteps with Rate Outlook

Given the interest that the Reserve Bank of Australia and Bank of Canada have garnered recently (for the dovish and hawkish turns respectively), it was natural for the market to be on edge with the New Zealand CPI data. Governor Bollard has offered a tentatively hawkish bias for a few months now, and that has led to the market pricing in a single, 25bp rate hike from the RBNZ for some time now. Yet, in past weeks, that hawkish outlook has eased, and the kiwi dollar has found its own strength flag. The inflation report could have revived the currency, but the 1.6 percent annual reading (near the low end of its band) fell in line with expectations. A lack of surprise translated into a lack of volatility.

Japanese Yen Slides as Deficit Balloons, Rate Outlook May See a Boost

The Japanese yen faded this past session, leading its crosses to significant progress on the week. The swell in risk trends through Tuesday’s session certainly helped the situation along, but the traditional funding currency has added its own weakness to the mix. The Bank of Japan’s Deputy Governor remarked recently that further stimulus would be pursued if necessary – a concern against the second largest adjusted trade deficit on record reported this morning. Something to watch in the meantime, Nikkei suggested BoJ rate forecasts could be raised this month.

Swiss Franc Marks its Biggest Drop in a Week after Jordan Confirmed

Some market participants believe the Swiss National Bank hasn’t taken a more proactive approach to its intervention efforts because it was helmed by an interim head. If that was indeed the case, the government has now confirmed Thomas Jordan as the SNB’s official President. Will the group actually find greater conviction in its policy actions now that they are ‘official’? Time will tell. Regardless, Jordan took the opportunity of his official inauguration to say that they were committed to defend its cap on the franc regardless of what the financial market trends were. A lift of the floor or some other extraordinary option is still a high probability. An emboldened leader only accelerates the issue.

Gold Slides for Fourth Day but Progress is Lacking

We haven’t seen a four-day slide from gold since a similar length run through December 15. That said, the tumble the metal has faced this week is little more than half the two-day drop through the opening week of April. The lack of momentum fits the low level of activity for the broader capital markets. That said, the volatility reading for the metal is far closer to nine-month lows than its equivalent equities measure. Similarly, aggregate open interest on gold futures is plunging lows not seen since September 2009. Perhaps the Euro crisis will return the metal to life.

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ECONOMIC DATA

Next 24 Hours

Bank’s own index seen treading

RBA Foreign Exchange Transaction (MAR)

Italian Industrial Orders SA (MoM) (FEB)

Italian industries seen to weaken again as austerity reforms cut into labor, business competitiveness

Italian Industrial Orders NSA (YoY) (FEB)

Italian Industrial Sales SA (MoM) (FEB)

Italian Industrial Sales NSA (YoY) (FEB)

Yields and interest may drive market perceptions for rest of the month

Spain to Sell 5.85% 2022 Bonds

Initial Jobless Claims (APR 14)

Weekly data expected to be weaker official NFPs

Bloomberg Consumer Comfort (APR 15)

Bloomberg’s own indices showing expectations elevated

Bloomberg Economic Expectations (APR)

Euro-Zone Consumer Confidence (APR A)

May support higher construction from yesterday’s data

Existing Home Sales (MoM) (MAR)

Investment spending seen lower

EIA Natural Gas Storage Change (APR 13)

Storage still increasing as natural gas near multi-year lows

Tertiary Industry Index (MoM) (FEB)

Japanese services seen stronger

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CLASSIC SUPPORT AND RESISTANCE – EMERGING MARKETS 18:00 GMT

INTRA-DAY PROBABILITY BANDS 18:00 GMT

U.S. 4Q GDP Higher but Misses Target; EUR/USD Dips and Rebounds

The U.S. Bureau of Economic Analysis on behalf of the U.S. Commerce Department reported that the U.S. economy grew 2.8% in the last quarter of 2011, an improvement over the previous quarter’s lackluster growth of 1.8% but falling short of the consensus estimate of 3.0% growth. According to the reading, which was the first of several, it can be primarily attributed to increased consumer spending and higher production from U.S. businesses. Consumer spending rose to 2%, up from 1.7% in the third quarter, but like the GDP data, fell short of analysts’ expectations of 2.4% growth.
Markets as much as expected that the results would come in as they did, especially given the recent release of growth forecasts from the individual Federal Reserve board members who foresee only moderate and modest growth. Indeed, the official statement from the Federal Open Market Committee cautioned that global financial market strains would continue to present significant downside risks. Chairman Bernanke suggested that additional QE might be made available if the recovery appeared to be faltering.
Shortly after the announcement the EUR/USD was trading at 1.3113, but as of this writing resumed its upward momentum and is approaching 1.3138, rising back toward the day’s high of 1.3159. On the OpenBook, trader yeshie turned a profit on his four open shorts, with the most recently closed providing him with a 76% return.
OpenBook guru pyruss is sitting on several long positions which he bought at the dip earlier, one of which is already showing a gain. Guru pyruss believes that the Euro-Dollar will cap 1.3145 at the upside but he will no doubt be watching this rebound closely.
One of OpenBook’s top traders, who prefers not to be considered a Euro bear, may have reconsidered his strategy as he said he would earlier in the week if the 1.30 level held which it clearly has. Yesterday, guru pawelskrzypek took a hit on several shorts that he closed out, and he has since opened several long positions in the pair.