Monday November 29, 2010 - 19:19:51 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex Research - Morning Report (Westpac)
Morning Report Tuesday 30 November 2010
News and views
Investors returned from the US holiday in a bearish mood, pushing the S&P500 0.8% lower, threatening 1173 support, and elevating the VIX barometer of risk aversion to a 4 October high. The Eurostoxx closed 2.5% lower. That was despite a solid Dallas factory survey and initial reports of strong retail spending over the long weekend, as well as a helpful bailout package for Ireland. Indeed, while that country's fiscal woes have been addressed, attention has simply shifted to other peripherals, Spain and Italy in the firing line last night, their 10yr government bond yields rising by 24bp and 23bp, respectively, compared to Germany's +2bp. Commodities bucked the risk aversion, the CRB up 0.5%, with a particularly strong gain in oil (1.9%), the better US data flow helping. US 10yr treasury yields followed US equities and are 4bp lower at 2.83%. The Fed buys a total of $10.5bn in treasuries today.
The US dollar's impressive rise since the FOMC meeting (4 November) continued, the risk averse mood beneficial. EUR was the worst performer of the day, falling from 1.3300 to 1.3064, last seen on 21 September. Safe-haven status went to the Swiss franc, USD/CHF stable around 1.0020, rather than the yen which may be suffering from Korean geopolitical tension. USD/JPY rose from 83.83 to 84.40.
AUD confirmed its neckline break by pushing lower to 0.9567 from an early Europe high of 0.9700. The recent run of Australian data has been uninspiring.
NZD also pushed lower from 0.7536 to 0.7429. AUD/NZD was stable around 1.2880.
US Dallas Fed factory index up from 3 to 16 in Nov. The production, orders, shipments and jobs indices all posted solid gains. Of the four regional Fed factory surveys released for November, three were up sharply, and only one (NY) fell.
Japanese retail sales fell 1.9% in October, against expectations for a 0.7% fall. This leaves retail sales 0.2% lower over the year, down from +1.4%yr in September. Also out today, small business confidence declined to 45.8 in November, from 46.4 in October.
Euroland business surveys keep rising. The business climate index rose from 0.91 to 0.96 in Nov, and the economic confidence index rose from 103.8 to 105.3 - both new cycle highs. Also, the European Commission published updated economic and fiscal forecasts for the eurozone and member economies. For Euroland, the 2010 growth forecast was lifted from 0.9% to 1.7% (due in large part to the surprise spurt in growth in Q2), but 2011 is expected to see growth moderate to 1.5% as budget austerity measures are pursued.
UK house prices fell 0.8% in Nov according to Hometrack, their fifth consecutive decline which left prices down 1.1% yr. In October, mortgage approvals fell from 47.4k to 47.2k, essentially unchanged since the start of the year (47.6k in Jan). Related data showed mortgage outstandings rising GBP1bn in Oct, and consumer credit up GBP0.3bn. Both figures were stronger than their Sep gains, but still way down on the GBP10bn/GBP2bn per month increases seen at the peak of the credit boom earlier this decade.
Canadian current account deficit C$17.5bn in Q3. The widest deficit on record - recall that Canada recorded surpluses on the current account in early 1990s and for most of the past decade. In other news, industrial product prices rose 0.5%, up for the third month running, on the back of energy and metal prices.
AUD/USD and NZD/USD outlook next 24 hours: Australian current account, building approvals, and credit are all released this afternoon and could excite the markets. AUD's break below a significant head-and-shoulders neckline on Friday predicted a multi-cent fall during the weeks ahead. Bounces remain capped by 0.9710. NZD continues to work its way to 0.7400, bounces still limited to 0.7560. NZ building and credit data should have minimal impact.
.Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 30 November 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 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 registered in England as a branch (branch number BR000106) and is authorised and regulated by The Financial Services Authority. Westpac Europe Limited is a company registered in England (number 05660023) and is authorised and regulated by The Financial Services Authority. Â© 2010 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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