News and views
Market mood remains less optimistic than fundamentals and indicators would otherwise suggest. US equities weakened at the open, the analyst chatter around equity over-valuations relative to other asset classes. Raw material (particularly fertiliser) and energy companies were the main underperformers. Helping the market recover (S&P500 closing +0.3%) was the Conference Board’s index of leading economic indicators, which rose in August for the fifth consecutive month. Oil futures fell 3.6%, again piggybacking on equity and US dollar moves. US 10yr notes mirrored equities, losing and gaining 6bp for no net change post-Sydney. Japan’s holiday (Monday-Wednesday) is cited as a potential dampener of appetite for tomorrow’s large 2yr auction.
The US dollar is little change from Sydney’s close, after peaking at 77.11 in NY. The potential for hawkish tones from Wednesday’s FOMC means the next few days could be dollar supportive. EUR fell to 1.4611 during the risk sell-off, recovering to 1.4702. GBP dipped to 1.6141, before recovering above 1.6200; the dailies paint a bearish technical picture. USD/JPY firmed to 92.00 area resistance.
AUD dipped another 30 pips from its Sydney close of 0.8621, but recovered to 0.8643.
NZD was similarly unchanged since the domestic close, dipping from 0.7060 to 0.7020 and back again. AUD/NZD tracked sideways around 1.2240 before the NY risk recovery pushed it down to 1.2200 support.
US leading index up 0.6% in Aug. The fifth straight gain in the LI reflected big positive contributions from the stock market and interest rate components, as well as supplier deliveries. July was revised higher too. The index has clearly turned and points to growth returning to the US economy in the second half of 2009.
UK house prices up 0.6% in Sep, according to the Rightmove survey of estate agents. The annual pace of decline on this index is now just –1.5%yr.
Outlook
AUD/USD and NZD/USD outlook today: The AUD and NZD rallies since March remain intact, but there are increasing signs of maturity. Given the US dollar environment looks supportive during the early part of this week, we prefer to be sidelined today. There’s no Australian data of note today. NZ’s Q2 current account should improve to -6.6% of GDP; although the announcement effect of this release has dwindled over the past year.
