Stocks retreating and EURCHF rally capped.


MAJOR HEADLINES – PREVIOUS SESSION

  • Japan Nov All Industry Index falls to -2.3% from -0.5%; expectations was -2.2%.

  • Australia 4Q Import Price up 10.8% from 5%; Export Price jumped 15.9% from 13.8%.


THEMES TO WATCH – UPCOMING SESSION

  • France – Flash manufacturing/Services PMI Jan (0800)

  • German - Flash manufacturing/Services PMI (0830)

  • Europe - Flash manufacturing/Services PMI (0830)

  • UK – Prelim GDP (0930)

  • UK – Retail sales Dec (0930)

  • Canada – CPI/Core CPI m/m (1200)

Market Commentary

Poor sentiment from a Wall St close in negative territory extended into a relatively quiet Asian session, with stocks accelerating gains in most centres. Australia suffered most, tumbling some 4.13% while Japan almost matched with 3.81% losses so far. Sony Corp issued profits warnings and this was the catalyst for heavier gains in the land of the rising sun.

As a result, risk was taken off the table in Asia ahead of the long weekend, resulting in losses for the usual JPY crosses as the JPY and USD adopted their customary role as safe havens. The CHF was also in buoyant mood despite recent SNB “threats” on intervention.

ECB’s Bini Smaghi was on the wires commenting that it would be risky and unjustified at the moment for the ECB to take interest rates close to zero. His comments were not sufficient to prevent a slow but steady slide in the EUR during Asian trading as earlier comments from Treasury secretary-designate Timothy Geithner repeated the long-standing US policy mantra that a stronger USD was in the US interest.

Things in the UK continue to paint a grim picture, with the financial sector grabbing headlines on some analyst’s view that the UK’s major banks would need up to GBP80 bln more in capital. If it can be viewed as a positive, on a similar note there was also talk that the UK government were considering injecting some GBP10 bln into nationalized Northern Rock to ramp up mortgage lending. GBP backed off over 1-big figure against the rising greenback in Asia, and today’s data releases are not expected to give any respite. Retail sales for Dec are expected to decline 0.7% m/m after a 0.3% rise in Nov.
Q4 GDP data is also due, expected to decline 1.2% q/q. Both sets of data expected to cap the pound.