A mixed and muted close for US equities saw most asset classes limp tiredly into the weekly close. The S&P500 and Dow were each up only 0.3%, banks down 1.6%, and the Nasdaq down 0.2%. The University of Michigan consumer sentiment survey was revised lower, but beat consensus, adding to the mixed flavour of markets on the day. Oil gained 1.3%, and copper lost 0.1%. US treasuries were flat. A raft of comments from government officials, including Bernanke, were targeted at regulatory reform, and had no market impact.
Currencies did little on Friday night. The weekly report on speculative currency futures activity showed short-USD positions increased markedly to the highest level for a year. EUR pushed up to 1.4255 around London, aided by a good Eurozone PMI manufacturing report as well as positive German IFO readings, but the soggy equities action dragged it back to the 1.4200 area where it closed. Technically, we note its failure last week to surpass the 3 June 1.4340 high. GBP weakened from the Sydney close, from 1.6540 to 1.6390, hovering thereabouts until the close. UK GDP was much worse than expected. JPY sat in a tight sideways range of 94.60 to 95.00.
After the Sydney close, AUD only ranged between 0.8135 and 0.8190, rumours (unsubstantiated) of RBA selling doing the rounds, but this morning opens near the upper bound, paid at 0.8180.
NZD similarly ranged without direction, 0.6540 to 0.6585. AUD/NZD traced out a solid 1.2420 support line, and is attempting to break higher at the NZ open this morning, trading at 1.2470.
US UoM consumer sentiment. The final July read was revised up from 64.6 to 66.0, but that still was down 4.8 pts from June's 70.8. Almost all of the upward revision was in the outlook component, which is up now 9.2 pts compared to end 2008. In contrast the current conditions index is up just 1 pt so far this year.
European business surveys post further gains in July. The advance PMI factory index jumped from 42.6 to 46.0 while the services PMI posted a less dramatic rise from 44.6 to 46.8. These surveys indicate that Euroland GDP growth was still contracting at the start of Q3, but at a slower pace than in Q2. Also, the German IFO business climate index rose from 85.9 to 87.3, with a solid rise in the current index a notable feature (up until June, IFO gains were mostly expectations driven).
UK GDP contracted 0.8% in Q2. This was the fifth quarter of recession, and although GDP fell at a lower pace than Q1's 2.4% slump, this advance result was weaker than expected and calls into some doubt the view that the economy might now be growing again.
NZD/USD is alone among the majors for beating the 3 June high, but it has not followed through. Without confirmation from the likes of AUD and CAD (commodity currencies), the bullish signal generated from the break above 0.66 last week is questionable. We will watch US equities closely this week, too, for signs this latest rally has substance post-earnings. We suggest a range of 0.6500 to 0.6620 today.
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