FYI | Jun 14 2012
By Andrew Taylor, Markets Strategist at GFT Markets
Top Headlines
o Further downgrades for Spain continue to weigh on markets
o US Retail Sales & PPI maintain the disappointment with last month’s figures
o Upcoming Greek elections dry up liquidity
o Market Moves:
· EUR/USD trades in 25pt range and AUD/USD 35pt
· WTI Oil holds above $82.20 & Copper above $331
· US 10Y Treasury yields at 1.59%
o GFT Markets currently see the FTSE down 9pts to 5474; the DAX up 1pts at 6153 and the CAC down 7pts to 3023 on yesterday’s close.
Asian equity markets followed the US markets apprehensive moves overnight as the Dow’s recent pattern of a pre-close squaring up saw a solid move lower as traders prefer not to hold positions through to the next session.
Traders keenly watched data being released in the US overnight for signs to whether the Fed will introduce some form of Monetary easing at its meeting next Wednesday. The figures did not disappoint for those looking for stimulus as Retails Sales and Producer Prices index kept in line with a deteriorating economy with declines in both last month . For an economy that is looking to inflate its way out of trouble, these liquidity injection seems to only affect the balance sheet by getting deeper into debt. Policy makers need to question the effectiveness of this ‘time buying’ option as the markets are less impressed each time it is used.
RBNZ Interest Rate Decision
Prev: 2.5% F/C: 2.5% Actual: 2.5%
The Reserve bank of New Zealand provided no surprises to leave its cash rate at current levels. Global risks and lower export commodity prices were sited in the accompanying statement with the focus shifting away from previous concerns of an elevated NZD.
Under current circumstances there is no hint of adjustments for the remainder of the year although things can change fairly quickly with the global risks encompassing markets.
Outlook
Volatility is present but the moves have not been damaging and in fact they have been relatively tame considering the enormity of the current themes taking centre stage. The skittish moves are due more to illiquid markets as players prefer to lighten exposures with only two days left of trade before the weekend.
The main result that the markets want from this election is merely an outcome. No matter what the makeup of the government, traders need to tick this box to know what and who we are dealing. A result is likely to provide some support for the risk trade initially although as markets analyse and digest the size of the job at hand it won’t take long for the unattended downfall of the European banking system to feature yet again.
Today the data card is full of what usually are high impact releases (ECB monthly bulletin, EU & US CPI, jobs claims, Real earnings), however, similar to yesterdays preparation we are looking for prints that miss expectations. It is these that will influence the probabilities of further stimulatory measures being employed.
We can expect European markets to start its day relatively flat.
GFT Markets currently see the FTSE down 9pts to 5474; the DAX up 1pts at 6153 and the CAC down 7pts to 3023 on yesterday’s close.
Economic Events to watch for EU and US session:
0600 GE May WPI
0800 EU May Long term interest rates statistics
0800 EU Jun ECB Monthly Bulletin
0830 UK Apr CML Regulated Mortgage Survey
0830 UK May UK monthly automotive production figures
0900 EU 1Q Labour cost index
0900 EU May Harmonised CPI
1230 US May CPI
1230 US 1Q International Transactions
1230 US Jun 9 Weekly Claims Report – Initial Claims
1230 US May Real Earnings
1230 US U.S. Weekly Export Sales
For more intraday analysis and trade ideas, follow me on twitter @ATaylor_GFT
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