Daily Market Reports | Jun 11 2010
By Rudi Filapek-Vandyck
A succession of positive economic data across the continents helped fire up buying activity on global equity markets overnight. The return of risk appetite saw the euro and the Aussie dollar snap back upwards, while safe haven gold predictably took a step back.
European equities first set the tone, driven by a rally in the mining sector. The DJ Euro Stoxx 50 gained 2.0% to 2609, the German DAX increased 1.2% to 6057 and the UK FTSE was 0.9% higher at 5133.
US equities followed up with even stronger gains. The DJIA ended 2.8% higher at 10173 (back above that psychologically important 10,000 level), the S&P 500 gained 3.0% to 1087 and the Nasdaq was 2.8% higher at 2219.
NYMEX crude gained US$1.10 to US$75.48. Both copper and aluminium gained 1.1% on the LME, while nickel bucked the trend and fell 1.7%. Gold retreated US$11.10/oz to US$1222.20 amidst some talk that too many investors are currently long the precious metal.
As far as economic data were concerned, yesterday simply was a good old fashioned good news day, and there was no Angela Merkel around to spoil the global party.
China's official release of trade balance date for May revealed a jump to US$19.53bn from US$1.63bn on a 48.5% export surge; NDRC house prices (May) eased to 12.4% from 12.8%; The ECB and the BoE left rates unchanged at 1% and 0.5% respectively; US weekly jobless claims (4 June) at 456K from 459K were higher than expected (but this time nobody paid attention) and Australia's labour market data added more optimism to the mix.
In addition, Spain launched what was a relatively positive 3 year Government debt auction overnight of EUR3.9bn and France delivered better-than-expected data on industrial production for April plus an unexpected return to growth in first quarter employment levels. Within this context, the interest rate hike by the New Zealanders served as the icing on the cake.
The Australian SPI 200 May 10 futures contract was up 68 points or 1.5% to 4509, suggesting a buoyant follow-through on the last day of the week.
Both gold and the USD weakened in what is probably best characterised as the general return of risk appetite. EUR/USD jumped towards 1.2120 on expectations the European debt crisis will not stall growth. GBP/USD opens higher on Friday at 1.4710 after gaining steadily overnight. USD/JPY opens at 91.30 after a quiet session.
It was a positive night for the AUD after better than expected employment data increased investor appetite for higher yielding assets. AUD/USD recorded a big jump to open at 0.8495 in the Asian session this morning. AUD/EUR opens higher at 0.7005 after making some solid gains late in the night. AUD/JPY opens higher at 77.60, and AUD/NZD opens at 1.2360 after a flat session.
The NZ dollar was one of the star performers on FX crosses overnight.
US bonds decreased after the US government sold US$13bn of 30-year notes at a yield of 4.182 % (forecast of 4.206 %), with a bid to cover ratio of 2.87 times (forecast of 2.60 times). The yield on 2-year notes increased 6bps to 0.782%, and the 10-year yield increased 15bps to 3.319%.
Australian bond futures underperformed US Treasuries at the short end of the curve, while outperforming at the long end of the curve. The implied yield on 3-year bond futures increased 9bps to 4.860% (price down 9bps to 95.140) and the implied yield on the 10-year bond futures gained 8bps to 5.420% (price down 8bps to 94.580).
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