Daily Market Reports | Jun 15 2010
By Rudi Filapek-Vandyck
A general lack of conviction. This is without any doubt the best way of describing what is happening on global equity markets at the moment. Despite recording a positive week, share markets are finding the going tough, with overall volumes thin, economic data mixed and with most investors ostensibly preferring the sidelines.
US equities have on balance gone nowhere over the past two sessions. The small gains booked on Friday were reversed in Monday's session. This occurred despite a positive lead-in from Europe, which assisted the Dow reaching some 100 points higher in last night's session. However, as the end of the session was approaching, selling orders started outweighing buying orders and the end result was minor losses.
All in all, the DJIA closed 0.2% down to 10191, the S&P 500 lost 0.2% to 1090 and the Nasdaq remained pretty much unchanged at 2244.
The Australian SPI 200 June 10 futures contract is up 3 points or 0.07% to 4529, suggesting a rather cautious opening.
US bonds sold off slightly as upbeat expectations for global growth offset another downgrade to Greece's credit rating. The yield on 2-year notes increased 1bps to 0.734%, and the 10-year yield increased 3bps to 3.260%.
Moody's Investors Service has now cut Greece's government-bond ratings by four notches to Ba1, which is a junk-grade rating.
Metals markets recorded some pretty hefty gains over the past two sessions, with copper futures now back above US$6600 and with nickel back above US$20,000/t. The WTI futures contract for July 10 increased 1.8% last night to US$75.12 a barrel.
As reported on Friday (see my Rudi's View story on the day) the latest batch of China data confirmed economic growth is slowing down in the country. In addition, UK industrial production data for April disappointed. They printed a decline of 0.4% after a rise of 2% the previous month. The market had forecast a gain of 0.4%.
US retail sales for May equally disappointed, printing a fall of 1.2% compared with consensus of a gain of 0.2%. The core data ex-autos were down 1.1% compared with expectations of a gain of 0.1%. The University of Michigan consumer sentiment for June (prelim) rose to 75.5 from 73.6, beating forecasts of 74.5.
In addition, EC industrial production for April equally beat market expectations, rising by 0.8%, beating expectations of a gain of 0.5%. To add to the surprise, the March outcome was revised up to show a rise of 1.6%, previously pegged at 1.3%, lifting the annual rate to 9.5% yoy.
In the end, negatives outweighed the positives.
The USD weakened, but without any real dramas, and the same holds for gold. Spot gold declined 0.1% to US$1,221.10 overnight, while silver remained steady.
The positive lead-in by European markets was led by resources stocks. Both equities (in Europe) and commodities were boosted after European industrial production increased more than expected. The DJ Euro Stoxx 50 gained 1.7% to 2683, the German DAX increased 1.3% to 6125. The UK markets were closed on account of the Queen’s Birthday (as was the Australian market yesterday).
EUR/USD rose strongly, but was unable to breach 1.2300 and has since retraced to 1.222 following Greece's downgrade. GBP/USD hit a one-month high above 1.48, but is now back at 1.4740. USD/JPY fell to 91.42 overnight, but is now slightly higher at 91.60.
AUD/USD breached 0.8660 and while Greece’s downgrade saw some selling, the AUD/USD still opens the Asian session on Tuesday morning strongly at 0.8578. AUD/EUR breached 0.7060 before retracing to open at 0.7022. AUD/JPY opens at 78.56 after rising above 79.60 overnight and the AUD/NZD pair opens at 1.2353 after a choppy session.
Australian bond futures underperformed at the short end of the curve, but outperformed US Treasuries at the long end of the curve. The implied yield on 3-year bond futures increased 4bps to 4.855% (price down 4bps to 95.145) and the implied yield on the 10-year bond futures gained 2bps to 5.385% (price down 2bps to 94.615).
As far as the week ahead of us is concerned, US economic data are likely to regain centre stage. Later today the Empire State manufacturing survey will be released. Tomorrow we get housing starts, producer prices and industrial production on Wednesday.
On Thursday follow consumer prices, the leading index, current account, Philadelphia Fed survey and those all-important weekly jobless claims.
If economist views are anything to go by, this week's data should confirm the US economy is on a gradual path of improvement.
In Australia, we start the week with April lending finance data, the RBA Board minutes, then a speech by RBA Deputy Governor Ric Battellino to Financial Executives International, plus credit card lending data for April. These are all scheduled for today (Tuesday).
On Wednesday follow the releases of March quarter dwelling starts and the Westpac leading index.
Today will also see the release of Japanese industrial production figures for April, as well as eurozone employment, UK consumer prices and NZ retail sales.
On Wednesday we get UK housing starts and unemployment, a (non) decision by the Bank of Japan, home sales in New Zealand and consumer prices in the EU.
On Thursday, the queue of US data (see above) will be preceded by retail sales in the UK. On Friday, there's a monthly report by the ECB, plus the release of central bank meeting minutes in Japan.
For further global economic release dates and local company events please refer to the FNArena Calendar.
