Markets traded on a firmer footing overnight. Trading was thinned by the closure of NY exchanges due to Hurricane Sandy but stronger US house prices (Case-Shiller) and company earnings results from Ford, BP and Deutsche Bank helped sentiment. European stocks closed up 1.5%, while S&P500 futures gained 0.9% during the London session. Commodity futures saw minor movement, Brent oil -0.4%, copper +0.4%. US 10yr treasury note futures implied a yield rise of around 3bp. Italy’s 10yr yield fell 2bp following a decent auction.
The US dollar index (DXY) is slightly weaker. European currencies outperformed, EUR rising from 1.2886 to 1.2983. USD/JPY plunged from 80.14 to 79.28 following the BOJ meeting which disappointed those expecting a larger scale of easing, but recovered partly to 79.65. AUD rose from 1.0340 to 1.0384 during the London morning and ambled sideways thereafter. NZD rose from 0.8200 to 0.8234 early London and then retreated to 0.8203. AUD/NZD rose from 1.2600 to 1.2648.
US house prices rose 0.5% in Aug according to the S&P-CS 20 city index, for a 2.0% yr annual pace of gain, the highest since the tax credit for home buyer boost to prices back in 2010. More evidence that housing is slowly finding its feet again.
US Conference Board consumer confidence index delayed to 11/1 due to the Hurricane.
Canadian industrial product prices rose 0.5% in Sep, the first gain in five months due to metals prices.
Euroland business climate index fell from –1.34 to –1.62 in Oct, a new post 2009 recession low; the recent peak was 1.42 early last year. The economic confidence index fell 0.7 pts to 84.5, also back at 2009 recessionary levels.
German unemployment rose 20k (Westpac’s forecast was spot on) in Oct, its fifth rise in a row and taking the jobless rate to 6.9% although Sep was revised up from 6.8% to 6.9% too.
UK CBI retail survey showed reported sales surging from 6 to 30 in Oct, the highest since Jubilee boosted June’s 42, after a lacklustre Olympics stifled third quarter for retailing.
Spanish GDP shrank 0.3% in Q3, not quite as weak as the Bank of Spain –0.4% estimate last week, but still the fourth straight contraction giving a –1.6% yr annual pace of output decline. Meanwhile the CPI edged up from 3.4% yr to 3.5% yr in Oct as the government’s tax measures continued to bite; the CPI was at just 1.9% yr in June.
NZD and AUD outlook: Local economic data today is minor for the currencies. Australia and NZ each have private sector credit and building approvals. NY markets are expected to reopen today.
NZD/USD 1 day: As long as 0.8240 above holds, we expect a move towards 0.8180.
NZD/USD 1 month: As long as trend support at 0.8090 holds, the case for a move towards 0.8355 remains alive.
NZ 2yr swap yield 1 day: Opening today up 2bp at 2.62%.
NZ 2yr swap yield 1 month: Below 2.50% on markets pricing in RBNZ easing.
AUD/USD 1 day: As long as 1.0400 above holds, we expect a move towards 1.0325.
AUD/USD 1 month: To 1.0200, a resources sector slowdown weighing on the RBA and AUD.