Monday November 15, 2010 - 19:24:28 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (Westpac)
Morning Report Tuesday 16 November 2010
News and views
US equities stabilised following strong retail sales data while shrugging off a weak NY regional manufacturing report as series volatility, the S&P500 currently up 0.5% and financial up 1.3%. Takeover news involving Caterpillar also helped. Commodities are slightly firmer overall, gold stabilising above $1360, and oil bouncing as much as 1.1% after the US data. US 10yr treasury yields rose to 2.87% despite the commencement of a heavy week of Fed purchases, $7.9bn of 2016-2017 bonds transacted yesterday. A growing chorus expressed doubts about duration of the current QE2 program in the face of better economic data. There were further denials from both Irish and EU officials that Ireland is seeking aid, although the Irish Finance Ministry finally confirmed discussions are occurring. Peripheral Eurozone government bonds rallied significantly again.
The US dollar continued its week long rally. EUR declined steadily through Europe and NY to a 1.3581 low of the previous day. USD/JPY peaked during early NY at 83.28 before settling around 82.80.
AUD bounced from its late Sydney low of 98.12 to 99.16.
NZD similarly bounced from 0.7683 to 0.7777. AUD/NZD again consolidated above 1.2720 support, mainly around 1.27760.
US retail sales up 1.2% in Oct. Much of this gain was due to a 5% jump in auto sales. Ex auto sales rose 0.4%, as did ex auto & gasoline sales. The breakdown showed ongoing recovery in building materials, strength in sporting goods and a bounce in apparel sales, but patches of weakness in furniture, electronics, health/personal care, department stores and miscellaneous. So a mixed picture outside of strength in auto sales.
US NY Fed factory index plunges 27 pts to -11 in Nov. That is the steepest one month drop in the decade long history of this index. Some of the detail was even weaker: new orders dropped 37 pts to -24; shipments fell 20 pts to -6; and jobs lost 13 pts but stayed positive at 9 in Nov. We had doubted the size of the Oct bounce in this index (Westpac's 10 forecast was in the lowest five of the 53 forecasts in the consensus) but this "calamitous" result either foretells of a renewed slowdown about to emerge in the US economy or it is just unfortunate volatility in an index that garners too much attention, perhaps because of its apparent timeliness.
US business inventories up 0.9% in Sep. New information in the report was a 0.8% rise in retail stocks. This completes a solid quarter for stock-building, already captured in the Q3 GDP report which saw inventories contribute 1.4 ppts to growth.
Japanese Q3 GDP stronger than expected at 0.9%qtr, 3.9%saar. That compares to expectations of around 2.5% and the Q2 outcome of 1.5%. Real GDP is now 4.1% above year ago levels and 3.1% below the March 2008 peak.
Euroland trade surplus EUR2.4bn in Sep. The first surplus since April reflected a 0.6% rise in exports and a 2.5% fall in imports.
UK house prices down 3.2% in Nov. The Rightmove index of asking prices fell for the fourth month in five, pulling annual prices growth down to 1.3% yr, its lowest since October last year.
AUD/USD and NZD/USD outlook next 24 hours: Some consolidation for AUD above 0.9800 major support looks likely today, while NZD should hold above 0.7700.
.Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 13 August 2010. 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 Westpacâ€™s
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