Key news:
Helped by the largest jump in the Conference Board’s consumer confidence index since early 2003, the US stock indices added to Monday’s gains, but at less than half a percent the advance in the S&P 500 index was meagre compared to Monday’s strong rally. Energy and utility companies led the gains, while tech-heavy Nasdaq finished the day half a percent lower.
Rating agency S&P’s move to cut long-term debt ratings of several large American and European banks after the close of the US session, however, put renewed pressure on stocks, with Asian stock indices and American stock futures sliding back into red readings.
While commodity prices yesterday were broadly higher on a second consecutive day with the WTI crude oil contract climbing back to around USD100 a barrel, most recent CFTC data showed a sharp drop of about 25% on the net (aggregate) commodities managed money positioning from mid-November. Net long bets in commodities were last around these levels in mid-2009, highlighting the impact of the euro area debt crisis being felt on multiple fronts.
Unlike their counterparties across the Atlantic divide that continue to see volatile trading conditions, US bond yields were again little changed, as US Treasuries traded in a rather tight range.
In FX markets, EUR/USD continues to trade in the 1.3245-3450 range with no decisive move on either side, as markets await further news from European talks. In overnight trading, EUR has managed to remain at the plus side of 1.33, but again trading in a rather tight range. Commodity-heavy Australian dollar outperformed its peer group once again, with the AUD/USD breaking above the parity first time since mid November, while USD/JPY continues to trade in a rather narrow range around the 78.00 mark. In the emerging market universe, higher oil prices combined with positive US sentiment during the American session fuelled a near 2% Mexican peso advance against the dollar.
Global Daily:
Focus today: Developments in euro debt markets continue to be main driver of the markets. On the data front consumer data in the euro area are due with German retail sales and French consumer spending this morning. Germany will also release unemployment. figures. The decline in unemployment came to a halt last month as unemployment rose 10k and the expected recession in Germany is likely to lead to a further increase in unemployment in coming quarters. Euro Flash CPI is expected to stay high at 3.0%, but it will fall rapidly in 2012 as base effects from food and energy prices kick in. In the US ADP employment will provide further input for Friday's payrolls report and Chicago PMI will give last input for ISM that will be released tomorrow.
Fixed income markets: The ECB yesterday failed to fully sterilize the bond purchases (SMP) adding some 9bn in excess liquidity this week. Usually this would push money market fixing (EONIA) lower, but the EONIA fixing seems stuck some 20bp above the deposit rate (0.50%) due to weakening of credit being active in the unsecured O/N cash market. Although this is not the first time an auction has partly failed, it might still be a warning that the ECB could face a harder time sterilizing the SMP going forward. Today, it will be interesting to see whether Euribor fixings can break the up-trend or whether yesterday’s slight downtick was a single occurrence. Also keep an eye on the 3M ECB liquidity tender (LTRO) for more signs of increased demand for liquidity.
FX markets: The move above 1.34 in EUR/USD yesterday turned out to be short lived. The news that the ECB did not drain all the liquidity this week and growing concerns about Italy after the high yield the country had to pay at yesterday's auctions weighed on the euro. Today, the FX market continues to watch the development in the debt crisis with the ECOFIN meeting in focus.
Scandi Daily:
Norway: Norwegian retail sales data for October will show whether the decrease in September was a one-off or the start of a weaker trend. The latest national accounts reveal that the weak spending in Q3 was the result of higher savings rather than lower income growth. Household real disposable income actually climbed 5.8% y/y in Q3, but the savings ratio rose from 6.5% to 9.1% in the same period. With continued strong growth in real incomes, low unemployment, rising house prices and an already high savings ratio, however, we expect consumption growth to hold up, and predict an increase in retail sales of 0.6% m/m in October.
- US Consumer Confidence for the month of November rose to index point 56 from 40.9 a month ago, the largest monthly jump in the index since 2003, highlighting the diverging sentiment in the US from European worries.
- Protesters in the Iranian capital Tehran broke into the British embassy, while demonstrating against the latest sanctions imposed by Britain on Iran.
- Euro area Finance Ministers approve the sixth loan disbursement to Greece.
- Standard and Poor’s cut the long-term credit ratings of a number of large banks including Goldman Sachs, Bank of America, Citigroup HSBC, Barclays and UBS by one notch, while two large Chinese banks, Bank of China and China Construction Bank, saw their ratings upped by a notch..
Helped by the largest jump in the Conference Board’s consumer confidence index since early 2003, the US stock indices added to Monday’s gains, but at less than half a percent the advance in the S&P 500 index was meagre compared to Monday’s strong rally. Energy and utility companies led the gains, while tech-heavy Nasdaq finished the day half a percent lower.
Rating agency S&P’s move to cut long-term debt ratings of several large American and European banks after the close of the US session, however, put renewed pressure on stocks, with Asian stock indices and American stock futures sliding back into red readings.
While commodity prices yesterday were broadly higher on a second consecutive day with the WTI crude oil contract climbing back to around USD100 a barrel, most recent CFTC data showed a sharp drop of about 25% on the net (aggregate) commodities managed money positioning from mid-November. Net long bets in commodities were last around these levels in mid-2009, highlighting the impact of the euro area debt crisis being felt on multiple fronts.
Unlike their counterparties across the Atlantic divide that continue to see volatile trading conditions, US bond yields were again little changed, as US Treasuries traded in a rather tight range.
In FX markets, EUR/USD continues to trade in the 1.3245-3450 range with no decisive move on either side, as markets await further news from European talks. In overnight trading, EUR has managed to remain at the plus side of 1.33, but again trading in a rather tight range. Commodity-heavy Australian dollar outperformed its peer group once again, with the AUD/USD breaking above the parity first time since mid November, while USD/JPY continues to trade in a rather narrow range around the 78.00 mark. In the emerging market universe, higher oil prices combined with positive US sentiment during the American session fuelled a near 2% Mexican peso advance against the dollar.
Global Daily:
Focus today: Developments in euro debt markets continue to be main driver of the markets. On the data front consumer data in the euro area are due with German retail sales and French consumer spending this morning. Germany will also release unemployment. figures. The decline in unemployment came to a halt last month as unemployment rose 10k and the expected recession in Germany is likely to lead to a further increase in unemployment in coming quarters. Euro Flash CPI is expected to stay high at 3.0%, but it will fall rapidly in 2012 as base effects from food and energy prices kick in. In the US ADP employment will provide further input for Friday's payrolls report and Chicago PMI will give last input for ISM that will be released tomorrow.
Fixed income markets: The ECB yesterday failed to fully sterilize the bond purchases (SMP) adding some 9bn in excess liquidity this week. Usually this would push money market fixing (EONIA) lower, but the EONIA fixing seems stuck some 20bp above the deposit rate (0.50%) due to weakening of credit being active in the unsecured O/N cash market. Although this is not the first time an auction has partly failed, it might still be a warning that the ECB could face a harder time sterilizing the SMP going forward. Today, it will be interesting to see whether Euribor fixings can break the up-trend or whether yesterday’s slight downtick was a single occurrence. Also keep an eye on the 3M ECB liquidity tender (LTRO) for more signs of increased demand for liquidity.
FX markets: The move above 1.34 in EUR/USD yesterday turned out to be short lived. The news that the ECB did not drain all the liquidity this week and growing concerns about Italy after the high yield the country had to pay at yesterday's auctions weighed on the euro. Today, the FX market continues to watch the development in the debt crisis with the ECOFIN meeting in focus.
Scandi Daily:
Norway: Norwegian retail sales data for October will show whether the decrease in September was a one-off or the start of a weaker trend. The latest national accounts reveal that the weak spending in Q3 was the result of higher savings rather than lower income growth. Household real disposable income actually climbed 5.8% y/y in Q3, but the savings ratio rose from 6.5% to 9.1% in the same period. With continued strong growth in real incomes, low unemployment, rising house prices and an already high savings ratio, however, we expect consumption growth to hold up, and predict an increase in retail sales of 0.6% m/m in October.