Solid bounce in US bank equities. The S&P500 gapped higher at the opening
bell, holding a 5% gain as we write. Possible catalysts were Citigroup's
announcement it was profitable in Jan/Feb 2009, a key US lawmaker saying
short-selling restrictions could be reimposed in a month, and the lingering
effects of earlier (this week) news that US banks' asset valuation rules may be
relaxed. S&P Banks posted a consecutive 12% daily gain, contagion driving
the EuroStoxx and FTSE both 5% higher. Copper went with the flow, up 3%, but
not oil, down 3% on a US Government report revising down oil demand forecasts.
The VIX index (risk-aversion barometer) dropped 10%, and US 10 year treasuries
were sold 11bp ahead of a chunky 3yr tender.
NZD eventually broke through 0.50 resistance and
surged to 0.5050, before falling back under 0.50. The market is nervous ahead
of the RBNZ's OCR review tomorrow, with forecasts of 50bp and 100bp likely to
have polar opposite effects on the currency, the former seen as supportive.
The AUD were bought on the
equities move to around 0.6490, but a midday NY spate of selling by Japanese
investment banks, who were looking to accumulate USD, saw it flop back to
0.6405. AUD/NZD had no real direction, contained in a 1.28 to 1.2890 range.
EUR rocketed to around 1.2820, the Japanese
USD-buying pulling it back, and then some, to 1.2610. GBP remained
weighed by negative sentiment, struggling to follow the risk-rally to 1.3905
after a weak UK IP report, but then easily falling to a 2-month low of 1.3690. JPY
remained in the previous day's 98 to 99 range.
US IBD/TIPP consumer optimism was
little changed at 45.3 in March.
A weaker reading for the economic outlook question offset by a slight rise in
the personal finance question and a jump in the assessment of federal
policies, following the passage into law of the stimulus package.
US wholesale inventories fell 0.7% in January, continuing the late-2008 slide.
Fed Chairman Ben Bernanke compared the current US situation to emerging market crises in the
past, so poorly managed was the flood of capital into the country. He
reiterated calls to overhaul financial system oversight, recommending the
creation of an over-arching body to supervise the whole financial system. On accounting
rules, he proposed tweaks to the mark-to-market system that might avoid
pro-cyclicality, although he "strongly endorsed the basic proposition of
mark-to-market". On fiscal stimulus he struck a middle ground, endorsing
stimulus to some extent while warning of the dangers of excessive government
debt. He also reiterated that financial stability was a necessary precondition
for economic recovery.
UK January industrial production was shockingly
weak at -2.6%, the weakest
monthly outturn since 1979 (except for a technical one-month drop in 2002).
Industrial production has not posted a gain for 14 months, and has fallen by
8.4% in the past four months alone. Manufacturing activity fell 2.9% to be 9.2%
down in four months, by far the weakest since monthly records began in 1967.
Not even the miners' strikes of the early-1970s had such a severe impact on
UK February RICS (surveyors) house price balance
remained very soft at -78.
The price measure has been trending higher since last April, but the
measure of sales volume has fallen to a new cycle low.
UK British Retail Consortium sales
monitor for February showed a
1.8% drop in same-store retail sales, unwinding January's 1.1% jump. This
foreshadows a return to falling retail sales when the official retail trade
figures are released on 26 March.
The ranging action of the past six days is set to continue, and all we can
suggest today is 0.49 to 0.51 should contain it. We wait for a break through
one of these key levels to tell us the likely direction over the next month. Q4
terms of trade are released this morning; it is a minor number for markets, but
if our economists' forecast of +0.7% close to correct, the market could be
positively surprised into mild NZD buying on the day.
β’ NZ Agribiz
March 2009 (9 March)
β’ NZ Weekly
Forex Outlook (9 March)
β’ RBNZ March
MPS Preview (6 March)
β’ A changing
climate (4 March)
β’ NZ Weekly
Forex Outlook (2 March)
papers/publications are available on Online Research on Westpac
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