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Market Update December 10

Are Greek politics about to unnerve financial markets again? That’s what many were left thinking overnight with PM Antonis Samaras bringing forward a vote on who will be the nation’s next President. With only 155 members in his coalition and 200 votes required, Samaras must find a further 45 votes to ensure the appointment is approved. In what is troubling markets, should the parliament fail to agree on three separate occasions it will trigger a snap general election, potentially opening the door for anti-austerity party Syriza to take power. Greek stocks fell 12.78%, the largest percentage fall on record, with yields on shorter-dated government debt surging above those for benchmark 10-year bonds, a clear sign of financial market stress. The first Presidential vote occurs on December 17.

US job openings rebounded in October with the Jolt job survey increasing to 4.834m. The reading, the second-highest level since January 2001, was well above the 4.685m figure of September and expectations for an increase to 4.79m. Elsewhere the number of new hires came in at 5.1m, unchanged from September, while the number of job quits, a gauge on confidence within the workforce to find new work, also held steady at 2.7m.

US small business optimism rose to the highest level since February 2007 in November with the NFIB small business optimism index jumping to 98.1. The reading was well above the 96.1 level of October with firms becoming increasingly-confident about the outlook for the economy, sales and earnings.

Germany’s trade surplus swelled to the second-highest level in history in October with an increase to €20.6b recorded. The surplus was higher than the €18.6b level of September and expectations for a decline to €18.5b and was only €1.5b below the all-time record high struck in July 2014. Helping to explain the increase imports fell by 3.1%, the largest month-on-month decline since April 2012, with exports declining by a smaller 0.5%.

UK industrial output contracted unexpectedly in October with a decline of 0.1% reported. The fall, the second in three months, was well below the upwardly-revised 0.7% increase of September and expectations for a gain of 0.2% with manufacturing output, down 0.7%, overshadowing gains in all other survey components. Still, despite the monthly miss, with stronger data rolling off the series annual output improved from 0.8% to 1.1%.

Ratings agency Fitch placed Japan’s A+ sovereign debt rating on watch negative overnight. The group stated that ‘the Japanese government’s decision to delay a consumption tax increase originally scheduled for October 2015 until April 2017 will meet a negative sensitivity identified in Fitch’s May 2014 sovereign credit review of Japan, unless broadly equivalent and permanent fiscal measures are announced in the forthcoming budget, which Fitch considers to be unlikely’.

 

The Day Ahead (AEDT)

The ASX 200 looks set for a flat start this morning with SPI futures pointing to a rise of 4pts on the open. While reflective of the declines witnessed elsewhere overnight, having fallen 1.7% yesterday and with energy prices modestly higher, a rebound, predominantly on the back of short-covering and proverbial ‘bargain hunting’, looks likely today.

A wild ride for the AUDUSD overnight with the pair rising from .8225 to as high as .8370 before retracing half of the move in the latter parts of trade. The catalyst behind the wild swings was movements in the USDJPY, something that is becoming increasingly influential on overall USD movements, with the pair hitting a low of 117.95 before screaming back to 119.56 over the course of US trade. Unless Asia decides to disconnect from what was seen overnight, something that is unlikely, movements in USDJPY will likely dictate where the AUDUSD ends up today. Support is found at .8260 and .8225 with resistance kicking in at .8360 and .8400.

Domestic data releases this morning include the Westpac-MI consumer sentiment survey for December (1030) along with housing finance data for October (1130). While both will create talking points they’re unlikely to have a long-lasting effect on markets. Across Asia we’ll also receive Chinese CPI and PPI for November, Japanese consumer sentiment and corporate goods price inflation, South Korean terms of trade and unemployment, Indian international trade and the latest REINZ house price index from New Zealand.

Data releases this evening include the MBA mortgage market index and federal budget figures from the States, industrial output and revised non-farm payrolls from France along with UK trade data for October. At 7am tomorrow morning the RBNZ will announce their December monetary policy decision. No change is expected.

 

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