tone was mixed last night, supported by positive earnings reports, but weighed
by negative economic data. Bank stocks performed (e.g. Amexâ€™s result), and led the
indices higher, but the S&P500 later faded on a record-low US consumer
confidence release, and is up only 0.8% as we write. Euro-zone and UK equities
closed largely unchanged. Commodities prices fell sharply in response to the
weak economic data and rising inventories (aluminium stockpiles at record
highs), WTI oil down 6% to $43, and copper 6% lower. A successful US treasuries
auction calmed fears of waning appetite amid increasing supply, and 10 year
yields fell 12bp.
its sideways range for the sixth day, needing an event to force a breakout. It
looked at the topside, around 0.5350, following EURâ€™s rally, and later on the
retreat, to 0.5250.
during Europeâ€™s morning had more conviction behind it,
reaching almost 0.6720, before pulling back for a rest at 0.6630. This
outperformance saw the AUD/ NZD cross establish itself clearly in a higher
range of 1.2450 to 1.26.
after the better-than-expected German IFO release, to.1.3330, later dampened by
weaker US data, to
1.3120. The GBP continued to claw back last weekâ€™s large
losses, nudging higher to 1.42. USD/JPY fell from 90
to 88.50, likely pushed by option-related flow from the same player who built
the large position which expired last week.
consumer confidence slipped to a new low of 37.7 in January, despite a slightly
less pessimistic view of the labour market (and in contrast to the rise in the
preliminary Uni of Michigan sentiment series). The consumer assessment of
business conditions was quite a bit weaker. Inflation expectations for the next
year continued to drift lower, but remained very high at 5.6%. In related news,
the weekly retail data showed a 1.8% fall in chain store sales and a 2.6% fall
in Redbook sales, both suggestive of a slumping consumer.
The Richmond Fed
factory index rose to -49 in January, in line with the other regional Fed surveys
that have been a little less negative this month. The jobs measure remained
weak at -40. There were more stark improvements in the services and especially
retail surveys, though these donâ€™t often provide reliable guidance to the national
indicators of those sectors.
S&P/Case Shiller house price index recorded another sharp drop in November,
down 2.2%. The 18.2% annual pace of decline was little changed from October,
given that prices were falling at the same monthly pace a year ago.
government ready to inject capital into the economy. Japan has announced
that they will provide public funds to all firms whose capital has been seriously
hurt by the financial crisis. The funds will be offered via a government affiliated
bank, and the firms will be required to be profitable within three years. Japan has stated that
it will inject funds by buying shares and is not ruling out any sectors in the
new funding assistance plan.
IFO business confidence rose slightly to 83.0 in January, its first rise
since May 2008. Further pessimism about the current situation was offset by
higher expectations, probably due to hopes that rate cuts and fiscal stimulus
will help the economy later this year.
retailers reported another very weak sales month in January, though not as
soft as late last year, with the CBI distributive trades survey rising from -55
to -47. Even so, readings at these levels imply a much weaker retailing picture
than that reported in the official monthly retail sales figures, which have
lost some credibility of late.
the mantra of the past few days, a breakout from this sideways range is imminent,
and the catalyst for that should come from two announcements: todayâ€™s Fonterra
payout, and tomorrowâ€™s OCR cut. For today, weâ€™ll opt for a 0.5250 to 0.5350 range,
with the direction of any break dictated by whether Fonterraâ€™s number is higher
or lower than $5.50.
Speizer, Senior Market Strategist, NZ, Ph: (04) 470 8266
contributions from Westpac Economics
Country Release Last Forecast
28 Jan Aus
Nov Westpac-MI Leading Index 0.6% â€“
CPI 1.2% â€“0.4%
Q4 Avg RBA
Underlying CPI 1.2% 0.8%
US FOMC Rate
Decision 0-0.25% 0-0.25%
Ger Feb GfK
Consumer Confidence 2.1 2.0
29 Jan NZ
RBNZ OCR Review 5.00% 3.50%
Merchandise Trade NZDm â€“520 80
US Dec Durable
Goods Orders â€“1.5% â€“2.0%
Jobless Claims w/e 24/1 589k 600k
Dec New Home
Sales â€“2.9% â€“7.0%
Retail Trade %mth â€“0.1% â€“0.8%
â€¢ NZ Weekly
Forex Outlook (27 January)
â€¢ NZ Q4
labour market preview (26 January)
Economic Overview January 2009 (23 January)
â€¢ RBNZ OCR
Preview (22 January)
â€¢ NZ Q4 CPI
Review (20 January)
â€¢ NZ Weekly
Forex Outlook (20 January)
papers/publications are available on Online Research on Westpac
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Mon 18 Dec
10:00 EZ- final HICP Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
13:30 US- Current Account Wed 20 Dec
15:00 US- Existing Homes Sales
15:30 US- EIA Crude Thu 21 Dec
03:00 JP- BOJ Decision
13:30 CA- CPI & Retail Sales
13:30 US Weely Jobless
13:30 US- GDP Fri 22 Dec
09:30 US- GB- GDP
13:30 US- core PCE Deflator & Presonal Income
15:00 US- New Homes Sales
15:00 US- final University of Michigan
17:00 US- early Closes Mon 25 Dec
00:00 Christmas Holidays
Potential Trading Opportunities
POTENTIAL PRICE RISK: Medium Mon--10:00 GMT-- EZ- final November HICP. flash data are rarely changed.
POTENTIAL PRICE RISK: HIGH- Medium Tue --09:00 GMT-- DE- IFO Survey. Key report but usually not a market-mover
POTENTIAL PRICE RISK: HIGH- Medium- Tue --13:30 GMT-- US- Housing Starts and Permits. Leading indicators of activity
POTENTIAL PRICE RISK: HIGH-Medium- Wed --15:00-- US- Existing Homes Sales. Top Housing statistic
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