Friday update…. No major sell-off despite weaker Chinese GDP

April 13, 2012 Daily Comment No Comments

It could yet happen but thus far markets have taken the Chinese 1st QTR GDP data in their stride. Not that it was way off expectations coming in at 8.1% not 8.4% its just that rumours of s stronger 9% figure had circulated giving equities a boost yesterday. Risk on as they say was the name of the game and forex markets also obliged with another leg down for the US dollar and Yen. Not that it was massive moves but EUR/USD hit 1.32 and EUR/JPY 107. Since the announcement we are little lower at 1.3170 and 106.65. The Australian dollar hit AUD/USD 1.0450 and is now 1.0380 and quite solid despite the Chinese numbers.

All in all you would have to say dollar bears were winning the day. Had the Chinese numbers been better then we could have seen a much bigger move to the downside for the US currency. Not that I am any wiser as to why other than forex trading seems happy to follow stock markets.

In Europe with the Italian bond auction passing by just about ok the tensions were off for now. If Chinese data remains a focus for the Far East and Australia then Spanish data will do so for Europe. Spain is commanding huge amounts of press comment at the moment and most of it paints a gloomy picture. In truth unless its a bumper summer for the economy then things will deteriorate even more.

Headlines

China… 1st Qtr. GDP 8.1% against an expected 8.4%… Rumours yesterday of a number near 9% proved off the mark. Mind you still a number western economies could only dream of.
North Korea… Rocket launch ends in failure as it breaks up soon after take-off. The only concern is what the North Korea might do to distract from this humiliation.
North Korea… Economists predict a slump in sales of North Korean missile technology.
Italy.. Bond auction passes with satisfactory outcome
Greece..January Unemployment hits 21.8% from 21.2 %…Upward trend continues…
US..Weekly jobless claims up to 380,000 from 357,000

I have seen little international comment on elections in Greece and France which will soon be upon us . They will at some point cause some angst to markets so watch out

Nice weekend

Thursday update…..Well scripted reaction as sentiment reverses

April 12, 2012 Daily Comment No Comments

Now come on you must know the form by now. Equities and peripheral bonds turned positive and the Yen and dollar sold off. A typical correction with forex trading continuing to be dominated by ins and outs in the Yen. EUR/JPY hit 106.68 more than a 100 pips up from lows. EUR/USD managed 1.3157 but has been unable to overcome resistance there and settled back near 1.31. Much of the move was spurred by ECB chatter of resuming bond purchases. That sent Spanish bonds better and then the rest followed. Equities were also better although closed well off the highs as US markets closed less than 1% better having been closer to 2% up. In EUR/USD there seems to have been plenty of good 2 way orders of size which sums up the split in views. We seem to have failed both ways in recent days in EUR/USD. 1.3150/70 is proving as tough to cross as the 1.3020/30 level. A break will see a quick 50 points in stop orders I should think which ever way.

Italian bond auctions today which will probably dominate morning trading. Plenty of friction between the Italians and Spanish at the moment. Italians blaming the Spanish for contagion. They are fine ones to talk. Elsewhere the Australian dollar enjoyed a better session on the back of better employment data. AUD/USD soared to 1.04 now 1.0375

Headlines

ECBs.. Couere reminded everyone that the ECB was still in the business of intervening in bond markets if required. Helped lift Spanish bonds (presently 10 years at 5.85%)
Greece.. Election day set for May 6th, New Democracy party showing a lead in the polls( centre right). Greek Q1 budget deficit €7.3 billion against 4.8 billion last year. Not sure what was expected but how can you sell that as good news.
Swiss Franc… Goldman’s Jim O´Neil thinks the SNB may raise the peg to 1.25 from 1.20 . Seems a bizarre call to me. Presumably they are long, what about the Muppets?
US… Feds Beige Book ( Summary or Commentary on Current Economic Conditions) says economy expanded at a modest to moderate pace.. There was noting in it for QE fans
US..A record March deficit of $198 billion reminds us of the problems facing the US and the wonder of the US treasury market
Australia.. Added 44,000 jobs against expected 6000. Headline unemployment unchanged at 5.2%
China.. Trade data tomorrow which could be a market mover