Equity markets shrugged off yesterday afternoon's rehashed news on Chinese bank lending curbs, which had hurt Asian equities, focussing instead on data showing US consumer confidence continues to improve and some positive US earnings surprises. Apple's earnings jumped 50% and insurer Travelers made a record profit in Q4, and the running total of companies which have beaten estimates stands at around 75%. The S&P500 is up 0.5% after a shaky start and risk aversion index VIX is 10% lower to 22.9. Also supportive was an IMF forecast for 2010 global growth, up from 301% to 3.9%. Unlike US and European equities, commodities markets did remain concerned by potentially slower China growth, the CRB index down 1.0%, oil -0.6%, copper -1.4%, silver -1.8%, but gold +0.1%. US treasuries are little changed, after a 7bp yield decline on the China news followed by a complete rebound on equities' bounce. The 2yr auction was well bid, and foreign (possibly central bank) investors appeared to return after a dip in December.
The US dollar is slightly higher. EUR slipped further during the European session to 1.4040, the Spanish property bubble fallout to the fore, as well as a hawkish think-tank report, bouncing to 1.4100 in NY. GBP plunged from 1.6260 to 1.6100 after a disappointing Q4 GDP result of +0.1%. USD/JPY spiked from 89.60 to 90.40 around the Sydney close on S&P's outlook for Japan's AA credit rating revised to negative, but later found a new 2010 low at 89.40.
AUD ground slightly lower to 0.8940 until the US equities bounce helped it rebound to 0.9020.
NZD bottomed at 0.7023 before bouncing to 0.7100. AUD/NZD moved higher to 1.2730.
US house prices update - two measures for Nov. The S&P/CaseShiller 20 city index posted a 0.2% gain in the month lifting the annual rate of decline from -7.3% to -5.3%. The FHFA index posted a 0.2% rise in the month. Very weak home sales figures through the quarter don't seem to have prevented prices from continuing to edge higher.
US CB consumer confidence rose from 53.6 to 55.9 in Jan. For the second month running, there was somewhat less pessimism regarding the labour market, which contributed to a near 5 pt rise in the present situation index, although expectations also managed a modest gain.
US Richmond Fed index rose from - in Jan, its second negative reading after seven positives peaking at 14 in Q3. The detail showed a slight rise in new orders, a lesser fall in shipments but a steeper jobs decline. The Richmond services index was stalled at -9 but the retail index jumped nearly 20 points back into marginally positive territory.
Euroland current account just back in surplus in Nov. The EUR0.1bn surplus was only the second surplus since early 2008.
German Ifo business climate index rises from 94.6 to 95.8, continuing its steady upswing which started in April last year, despite some concerns that economic growth might falter in Q4 or Q1. Both the current and outlook indices posted gains. Also German import prices rose 0.5% in Dec to be down -1.0% over the year. Euro gains have meant falling annual prices since late 2008.
French consumer spending jumped 2.1% in Dec, a solid end to the year driven by cars due to an extended scrappage scheme and healthy gains for consumer durables and clothing.
UK GDP grew just 0.1% in Q4 last year, just below Westpac's bottom of the range 0.2% forecast and well below the consensus for 0.4%. So the 6 qtr long recession is finally over, but in the weakest possible way. Peak to trough, the longest ever UK recession saw output shrink by a huge 6%. With snowstorm disruption and the VAT hike in Jan, there is some risk that Q1 GDP won't be any stronger. Other data included a slight rise in bank mortgage approvals for house purchase from 45.0k to 45.9k in Dec.
AUD/USD and NZD/USD outlook today: AUD has fallen 4 cents since mid-January and is due a bounce, so that a move higher today to 0.9100 is likely. The inflation report poses major event risk however. NZD should similarly bounce to 0.7180 today, assuming no AU inflation surprise.
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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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