sea of red in the equities world last night. Indices were down across the
globe, the S&P500 down 3.6% early NZT, the Eurostoxx and FTSE closing -5%,
and the Nikkei -4%. This feels like a new wave of selling, as markets sense
governmentsâ€™ supportive measures to date are inadequate, and the bailout game
continues, witness AIGâ€™s return to ask for US$30 billion more yesterday. HSBC
raised more capital via a 48% discounted rights issue, hurting bank equities in
the UK. The IMF
said it will probably join private forecasters in a negative global growth
outlook. Asian currencies were battered further, their central banks selling
USD in defence, and then rebalancing their reserves by buying USD against EUR,
GBP etc. Oil fell more than one would expect, down 10% to $40, as OPEC cuts were
seen to have little effect. US treasuries reasserted
their risk-averse identities, 10yr notes rallying by 11bp.
unusually subdued overnight, locked in the 0.4910 to 0.4970 range established
late in the domestic session. Local traders wait for the RBA move at NZT. Yesterdayâ€™s Mascot Finance failure
will be watched closely for the manner and speed of resolution for deposit
holders which have government guarantees.
AUD failed to
make further headway down after the domestic session, supported at 0.63, and
capped at 0.6390. With market forecasts for the RBA rate cut today spread between
zero and 50bp, there is potential for an AUD reaction, and pre-positioning was
likely light. AUD/NZD made an attempt on 1.29, but fell a bit shy, and seems more
comfortable closer to 1.28 for now.
1.2545 to 1.2635 range suggested a market wary of the 1.25 support level.
GBP displayed no
such interest in consolidation, falling from 1.4290 to 1.3960 during Europe; the data
was all weak, and HSBCâ€™s issue spooked local equities. JPY was well contained
by 97 to 98, Asian currency sellers crowding each other for now.
factory ISM rose slightly to 35.8, consolidating the gain made in January. The rise
was mainly due to an improvement in production. The employment indicator dropped
to its lowest level since the survey began in 1948, further evidence that the pace
of job losses is accelerating.
construction spending fell 3.3% in January, and recent months were revised down,
making the construction picture look even bleaker than before.
core PCE deflator continued its slide to 1.6% yr, its lowest
since 2003. Personal income posted a surprise gain of 0.4%, and personal
spending was stronger than expected at 0.4%, continuing the theme of relative
stability in much of the data relating to January.
factory PMI was revised from 33.6 to 33.5 in Feb in the final
estimate, setting a new low for the series.
CPI flash estimate was surprisingly strong at 1.2% yr, especially given base effects
will have depressed the figure.
factory PMI fell to 34.7, just a whisker above Novemberâ€™s 17-year low,
suggesting another savage negative for March quarter GDP.
consumer credit expanded ÂŁ0.4bn, while net mortgage lending grew just ÂŁ0.7bn.
Taken together, overall net lending to individuals increased by the smallest margin
since records began in 1993.
HBoS house prices fell 2% in February, unwinding Januaryâ€™s surprise
increase and bringing annual house price inflation to -17.8%.
GDP fell -3.4% annualised in Q4. Monthly GDP showed that each month of the
quarter was weaker than the last, with a whopping 1% decline in December.
The NZD has
now arrived in the 0.45-0.50 window we forecast. The 0.50 level now becomes a
strong cap on price action, and moves from here onward should be laboured. A
0.49 to 0.50 range best describes our expectations for today, but watch for any
surprise move by the RBA.
Speizer, Senior Market Strategist, NZ, Ph: (04) 470 8266
contributions from Westpac Economics
Country Release Last Forecast
3 Mar Aus
Jan Retail Sales 3.8% 0.6%
Acct Balance AUDbn â€“9.7 â€“8.0
Spending 1.1% 1.1%
Decision () 3.25% 3.0%
US Jan Pending
Home Sales 6.3% â€“1.0%
Sales mn annâ€™lsd 9.6 9.4
UK Jan PMI
Construction 34.5 32.0
Can BoC Rate
Decision 1.0% 0.75%
4 Mar NZ Feb
ANZ Commodity Prices -4.3% â€“
Aus Q4 GDP
â€˘ NZ Weekly
Forex Outlook (2 March)
â€˘ NZ Weekly
Forex Outlook (16 February)
â€˘ NZ Weekly
Forex Outlook (9 February)
â€˘ NZ Q4 HLFS
Review (5 February)
â€˘ NZ Q4 LCI
and QES Review (2 February)
â€˘ NZ Weekly
Forex Outlook (2 February)
papers/publications are available on Online Research on Westpac
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