Tuesday December 1, 2009 - 19:58:59 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (Westpac)
Morning Report Wednesday 2 December 2009
News and views
Equity markets from Asia to Europe to the US posted decent gains last night, the Dubai World default now seemingly a distant memory. The S&P500 opened strongly and held its gains to be +1.2% currently. US data headlines were supportive overall, pending home sales a positive surprise, and the ISM manufacturing survey, although posting a disappointing headline, showed new orders rising relative to inventories, arresting the declines of the past two months. Many key commodities, such as copper (+1.5%) and silver (+3.5%), made fresh 2009 highs. Gold (1.7%) made a fresh all-time high of $1202, looking technically overbought. US 10yr notes paid attention to the ISM new orders data and fell by 4bp, but 2yr notes held steady around 0.66% yield. Credit spreads generally contracted, Greece (CDS) by 40bp.
The US dollar was again shunned. After flirting with sub-1.50 yesterday, EUR rose to 1.5120, and GBP rose from 1.6400 to almost 1.6650. USD/JPY fell from around 87.50 to 86.60, officials announcing an increase in monetary stimulus, but disappointing a market expecting much more (such as yen intervention).
AUD started its rise late Sydney from around 0.9100, and took off during Europe/NY to reach 0.9260. A couple of McCrann articles added nothing for markets.
NZD based around 0.7150 yesterday, and rose to just under 0.7300 last night. Fonterra's monthly milk powder auction price rose 3.6% (mom), within market expectations. AUD/NZD fell from 1.2800 to 1.2650.
US manufacturing ISM dropped back from 55.7 to 53.6 in Nov, although the details were encouraging. New orders picked up and inventories were run down, and prices paid rose at a slower pace. The jobs component fell but remained above 50 for a second month, suggesting a slow pickup in hiring in the sector.
US construction spending was flat in Oct, with a 4.4% surge in housing balanced out by continued weakness in commercial construction. However, September's gains were revised to a decline, and indeed this series has suffered from sharp downward revisions to history for most of the last year - so the true picture may not be known for a while yet.
US pending home sales rose 3.7% in Oct, continuing their recent strong run to be up 28% on a year ago. This will partly reflect a scramble to take advantage of the first home buyers' tax credit before it expired in November (since extended).
The Bank of Japan held an unscheduled monetary policy meeting, prompting speculation of more aggressive easing measures including FX intervention. The result was less dramatic: the BoJ offered to provide JPY10tn of three-month loans, and kept its monthly purchases of government bonds at JPY1.8tn. By way of comparison, during the first round of quantitative easing early this decade, the BoJ increased its reserve balances from around JPY4.5tn to a peak of JPY30tn.
Eurozone manufacturing PMI was revised up from 51.0 to 51.2 on the final estimate for November, consistent with slow growth.
Eurozone unemployment rate unchanged at 9.8% in Oct, though Sep was revised up slightly to this level. Unemployment in Europe is the highest since 1998, but - for a change - lower than in the US.
UK manufacturing PMI fell back from 53.4 to 51.8 in Nov - consistent with slow growth, as in most developed economies.
UK Nationwide house prices rose 0.5% in Nov to be up 2.7% on a year ago.
AUD/USD and NZD/USD outlook today: AUD has managed to move back above its multi-month trend support; holding above 0.9240 would be bullish for the days ahead, while a break above 0.9400 would be positive for the medium term. NZD remains inside its 0.7080-0.7635 range, and offers no medium term clues, but looks supported at 0.7200 on the day.
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 14 November 2007. All customers please note that this information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. Australian customers can obtain Westpac's financial services guide by calling +612 9284 8372, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without notice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is regulated for the conduct of investment business in the United Kingdom by the Financial Services Authority. Â© 2004 Westpac Banking Corporation. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.
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