fuel for the negative sentiment prevailing â€“ bleak US retail sales data,
and a couple of large international banks warning of large losses and capital
needs â€“ hit the equity indices in the US and Europe hard. The S&P500 is
down 4% as we write, and Europe closed 4% lower.
Commodities, too, were knocked down: WTI crude oil -4%, copper -4%, foods -2%,
and even gold -2% (which suggests across-the-board position unwinding). The VIX
measure of risk-aversion rose 17% to 50, and marks a new wave of fear embracing
financial markets. Credit downgrades are a highly visible indicator of the
current malaise, and S&P added Greece to its list
(cut to A-). News that Ireland may need
IMF assistance was subsequently denied.
rally ended just shy of 0.56 at Europeâ€™s open,
followed by a fast fall to 0.54 support, where itâ€™s rested since NY open. That
fall pushed the AUD/ NZD cross beyond the 1.22 level to almost 1.23, and 1.22.
Kiwi, AUD/USD has not yet established a new 2009 low, with
0.66 holding after a fall from the 0.68 spike last night. That may change, of
course, with the important employment figures released this morning.
While the EUR has changed
little since this time yesterday, the volatility has been significant. A
corrective rally ended during Europeâ€™s morning
at the 1.3340 level, followed by the poor data releases for Eurozone industrial
production and German GDP, combined with the Irish comments, which drove it
down to the 1.3090 level. It has been nudging resistance at 1.32 since.
relatively well behaved, ranging between support at 1.45 and 1.47, the strength
likely driven by a large repatriation order. USD/JPY did dip
below 89 briefly, but that level has held well since Monday; when it does
break, it should provide solid resistance.
retail sales plunged by 2.7% in December, even worse than the market expected,
and there were downward revisions to previous months. Ex-auto sales were even
weaker at -3.1%. Lower gasoline prices appear to have been a major contributor
to both the December fall (sales were down 16% for the month) and the
historical revisions. However, the weakness was widespread across sectors.
Sales of building materials dropped 2.9%, while clothing and general
merchandise fell by 1.6%.
import prices fell by 4.2% in December, less than expected, though
there were also downward revisions to previous months, particularly for
petroleum. Ex-petroleum prices fell by 1.1%, partly reflecting the bounce in
the US dollar late last year.
Fedâ€™s Beige Book was not surprisingly filled with anecdotes of weaker activity
across the country. Retail spending was seen as weak, particularly during the
Christmas holiday season, despite evidence of deep discounting. Most regions reported
that credit conditions were tight or becoming tighter.
industrial production fell 1.6% in November, bringing the annual rate of
decline to -7.7%. National data for production and car exports point to a
further decline in December, as global demand and confidence collapse.
GDP growth was estimated to have slowed to 1.3% in 2008, implying that
GDP may have shrunk by as much as 2% in Q4.
Our call for
NZD this week has been to sell it on strength, and last nightâ€™s brief push up
to almost 0.56 was one such example. We maintain that call, and any bounce to 0.55
today should be sold. The likely range today is 0.54 to 0.55, with 0.52
expected during the next 5 days.
Speizer, Senior Market Strategist, NZ, Ph: (04) 470 8266
contributions from Westpac Economics
Release Last Forecast
Employment chg â€“15.6k â€“6k
Rate 4.4% 4.5%
PPI/Core PPI â€“2.2%/0.1% â€“2.0%/0.1%
Jobless Claims, w/e 11/1 467k 500k
JanEmpireState Index â€“25.76
Philadelphia Fed Index â€“32.9 â€“35.0
Machinery Orders %mth â€“4.4% â€“10%
Corp Goods Prices %mth â€“1.9% â€“0.5%
Eur Dec CPI
%yr 2.1% 1.6%
Announcement 2.50% 2.00%
â€¢ Change of
OCR Call (14 January)
â€¢ NZ Q4 CPI
Preview (14 January)
â€¢ NZ Q4 QSBO
Review (13 January)
â€¢ NZ Weekly
Forex Outlook (13 January)
â€¢ NZ Q4
Employment Confidence Index (7 January)
papers/publications are available on Online Research on Westpac
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