Sentiment bounced overnight on an upbeat earnings result. The S&P500 gapped up at the NY open, and ground higher throughout the session to end up 2.5%. US #2 home improvement retailer Lowe's Q1 earnings beat consensus and generated a bullish 12 month forecast, partially neutralising the previous week's grim retail sales report in the minds of investors. Bank of America's upgrade to "buy" by Goldman Sachs boosted its shares by 10% and lifted the banks sector. Risk barometer VIX fell 2.6 to 30.5, a level last seen on 19 September 2008. Oil (+4.8%) and copper (+2.5%) went along with the risk ride, oil boosted additionally by unrest in Nigeria and fire at a Pennsylvania refinery. The interest rate story of the day was US 3mth Libor speeding up its downward trajectory by falling 4bp to 0.785%. Risk-affection saw 10 year notes sold by 8bp.
After weakening during Europe's morning to 1.3425, EUR followed the S&P500's lead and rallied in a straight line to 1.3545. USD/JPY rose a yen to 95.90 after Japan's vice finance minister said they were watching the fx market carefully, implying a threat of intervention. The comment was well timed, given risk-sentiment was already negative for yen, and the weakening continued to the current 96.40 level.
Risk currency AUD rose from 0.7500 to the current 0.7665. A broad based commodities rally no doubt helped. Today's RBA minutes will be combed for clues regarding the next meeting.
NZD similarly rose from 0.5850 to 0.5950. AUD/NZD moved to a higher 1.20 to 1.29 range. Producer prices yesterday confirmed inflation is well off the radar
US NAHB housing market index rises from 14 to 16 in May. Less pessimistic homebuilder sentiment adds to the body of evidence suggesting the US housing market might be finding a base.
Treasury Secretary Geithner says the economy has "clearly stabilised". That is a brave call; we would assess the pace of decline of the economy as "diminishing". Geithner does acknowledge recovery may "still feel fragile for a while" which is a fair comment for when the recovery starts at some future point and that unemployment "may keep rising as growth rebounds": Westpac would replace "may" with "will".
Euroland trade deficit EUR2.1bn in March, the thirteenth month of decline, and reflecting the impact of collapsed global trade on exports and weak European demand for imports.
UK house prices rise 2.4% in May! This was the fourth monthly gain in the Rightmove index, and took the annual rate up to -6.2% yr from -7.3% yr. That compares to losses of -15% yr or greater on the major lender price series, the difference being that Rightmove measures asking prices reflecting seller "ambition, optimism and necessity" whereas the lender series measure realised prices.
This rebound in NZD can go slightly higher, but should stall at 0.5990 for the medium-term case to be considered bearish. The RBA minutes today poses the most likely event risk.
Date Country Release Last Forecast
19 May Aus RBA Governor Stevens Speaking
RBA Minutes of May Meeting
Treasury Sec. Henry Speaking to ABE
US Apr Housing Starts â€“10.8 â€“2.0%
Apr Housing Permits â€“8.5 4.0%
Ger May ZEW Economic Sentiment 13.0 20.0
UK Apr CPI %yr 2.9% 2.3%
20 May Aus May Westpac-MI Consumer Sent 92.7 â€“
Q1 Wage Price Index 1.2% 0.9%
Apr Merchandise Imports AUDbn 17.3 â€“
Latest Research Papers/Publications
â€¢ NZ Weekly Forex Outlook (18 May)
â€¢ NZ Q1 Retail Sales Review (15 May)
â€¢ NZ Weekly Forex Outlook (11 May)
â€¢ NZ Q1 HLFS Review (7 May)
â€¢ NZ Weekly Forex Outlook (4 May)
â€¢ NZ Economic Overview May 2009 (1 May)
These 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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