Wednesday February 27, 2013 - 19:45:45 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex - Westpac Morning Report
Morning Report Thursday 28 February 2013
Global market sentiment: Markets were calmer last night. There appeared to be no residual impact from the Italian election stalemate, the Eurostoxx 50 index rebounding by 1.6%. An EC Eurozone economic confidence survey improved, and US data for durable goods (ex-aircraft) and housing beat expectations, helping the S&P500 to a 1.0% gain so far. Bernanke’s second day of testimony to the Senate was less confrontational than expected, perhaps also helping sentiment. Commodities were less enthused, though, Brent oil down 0.4%, copper down 0.5%, and gold down 1.1%.
Interest rates: US 10yr treasury yields consolidated after a four day decline, ranging between 1.84% and 1.89%. A 7yr auction was a tepid affair. with a bid-cover ratio of 2.9 (vs 2.9 average). Eurozone peripherals also stabilised in the wake of the inconclusive Italian election, 10yr government bond yields in Italy down 9bp and in Spain down 13bp. Italy managed to auction EUR6.5bn of 5yr and 10yr bonds. Australian 3yr bond yields initially dipped from 2.72% to 2.68% but rebounded to 2.73%.
Currencies: The US dollar index (DXY) is slightly lower. EUR rose from 1.3050 to 1.3130. USD/JPY bounced off 91.14 to 91.94. Underperformer AUD slipped a little further, from 1.0230 to 1.0184 (a five-month low) before stabilising. NZD stabilised around recent lows, ranging between 0.8226 and 0.8266. AUD/NZD ranged between 1.2365 and 1.2400.
US durable goods orders fell 5.2% in Jan, mainly due to sharply lower Boeing orders (civilian aircraft fell 34%). Defence orders were down 70% having soared 107% in Jan, and auto orders were about flat for the second month running. The bright spot in the report was the 6.3% jump in core capital goods orders, which have risen about 12% since the start of the fourth quarter. However this strength is taking time to show up in shipments of core durables which fell 1.0% in Jan and were flat in Dec.
US pending home sales rose 4.5% in Jan and the Dec fall was revised from –4.3% to –1.9%. Sales are up 10.4% yr.
Eurozone economic confidence rose from 89.5 to 91.1 in Feb, its highest in nine months. But in the aftermath of the Greek election mess in May last year this index fell from 93.7 to 88.7 in 3 months and something similar should be in prospect in the next few months, given the timely reminder from the Italians that fiscal austerity is deeply unpopular across much of Europe. Also, the business climate index rose from –1.09 to –0.73, its fifth month without slippage. And the GfK reported a slight rise from 5.8 to 5.9 in their “March” consumer confidence report for Germany.
Eurozone money supply M3 annual growth edged up from 3.4% yr to 3.5% yr in Jan, but credit to the private sector decelerated from –0.7% yr to –0.9% yr.
UK GDP growth revised up from 0.0% to 0.2% in 2012, although the Q4 contraction of 0.3% was unrevised. Exports and capital expenditure were behind the quarterly decline, despite private and government spending growth. A separate measure of business investment spending was down 1.2% in Q4, after a downward revised 0.5% Q3 gain, so a grimmer picture on the capex side of the UK economy late last year is emerging.
Italy update: There is speculation a bizarre Bersani-Berlusconi alliance might emerge (bizarre given their polar positions on austerity) in an effort by those two to avoid a second election to keep the comedian Beppe Grillo from winning an even more embarrassing % of the popular vote than the 25% he achieved at the weekend. Meanwhile the caretaker government under PM Monti will probably proceed with the bailout of Monte Paschi bank that was agreed in Dec, despite Grillo protests.
Event risk today: NZ data today (building permits, monthly business confidence) is second tier but could cause minor NZD movement. Australia’s CAPEX activity (and expectations) will be more important.
NZD/USD 1 day: 0.8300 should provide resistance today, the downside looking vulnerable near term.
NZD/USD 1-3 month: The positive trend since May has been broken and we now targets around 0.8100 during the month ahead. Our view of a fresh high later in 2013 remains intact though.
NZ 2yr swap yield 1 day: Opening today down unchanged at 2.92%.
NZ 2yr swap yield 1-3 month: Following this correction, which should extend to the 2.80%-2.90% area, a rise above 3.20% should ensue.
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 28 February 2013. 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 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. © 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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