News and views
In a fairly uneventful evening, most markets consolidated recent gains and losses. US equities are largely unchanged, the S&P500 up 0.1%, although the banks’ sub-index is down 1.3%. US Treasury Secretary Geithner said in an interview the US is in no danger of losing its AAA sovereign credit rating, but equity investors remain concerned about southern European sovereign risks. The world’s largest bond fund, PIMCO, said as much at a press conference yesterday, commenting on its reallocation of risk from Europe into Brazilian bonds and the CNY currency, while also expressing confidence in the US economy. Commodities partly recouped recent heavy losses as the US dollar slipped, oil up 0.7% on cold weather, copper up 1.8%, and cotton up 2.8%. US treasuries added a couple of bp across the curve ahead of another hefty auction week ($81b of 3yr, 10yr and 30yr bonds), safe haven demand slipping.
The US dollar index consolidated just under its recent high of 80.68, ranging between 80.10 and 80.50. The EUR fluctuated between 1.3640 and 1.3710, its oversold condition slowing further losses for now. USD/JPY ranged between 89.10 and 89.60.
AUD ranged between 0.8640 and 0.8710. Not market-moving but topical, influential journalist Terry McCrann cautioned yesterday’s announced termination of the wholesale government guarantee facility could haunt in the event of another credit crunch.
NZD underperformed after spiking to 0.6920 early Europe, testing 0.6860 support several times. AUD/NZD rose from a 1.2570 overnight low to 1.2650.
No US data.
Japan’s current account narrowed slightly in December. The seasonally adjusted balance came in at ¥1100bn in December against a ¥1305bn surplus in November. The raw data (the relevant measure for flows) also narrowed by ¥200bn or so. The income surplus explained much of the that, falling to ¥806bn from close to ¥1 trillion for most of the second half of the year. Also today, January bank lending fell to -1.5%yr from -1.0%yr in December.
Europe Sentix investor sentiment fell from -3.7 to -8.2 in February, the first drop in seven months. A drop of around 6% in European share markets and growing concerns about sovereign debt gave investors plenty to worry about in January.
Canada housing starts rose 5.8% in January, continuing their strong recovery from the April lows. Annual benchmark revisions also added around 7% to starts through the second half of 2009.
Outlook
AUD/USD and NZD/USD outlook today: AUD should again hold above 0.8600 support, given its resilience since Friday night. NZD should hold above 0.6800. Today’s NZ PM speech to Parliament may outline tax system changes which could have a NZD bearish tilt.
