But Weekly US Consumer Confidence drops sharply again - sentiment dissonance is still deafening.
MAJOR HEADLINES – PREVIOUS SESSION
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New Zealand Sep. REINZ House Sales rose 43.7% YoY vs. 39.3% in Aug.
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US Weekly ABC Consumer Confidence fell to -48 vs. -45 the previous week
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Australia Oct. Westpac Consumer Confidence rose to 121.4 from 119.3 in Sep.
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Japan Sep. Domestic CGPI rose 0.1% MoM as expected
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China Sep. Trade Balance fell to $12.93B vs. $17.0B expected and $15.7B in Aug.
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Japan BoJ left rates unchanged at 0.10% as expected
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Japan Sep. Consumer Confidence out at 40.7 vs. 41.3 expected and 40.4 in Aug.
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Norway Q3 House Price rose 1.8% QoQ vs. 5.3% in Q2
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China Sep. New Yuan Loans rose to CNY 516.7B vs. CNY 440B expected and 410B in Aug.
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China Sep. Foreign Exchange Reserves rose to $2.273 trillion vs. $2.132 trillion in Au.
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UK Sep. Jobless Claims Change out at 20.8k vs. 242.5k expected and 23.0k in Aug.
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UK Aug. Average Earnings ex Bonus rose 1.9% 3m/YoY as expected and vs. 2.2% in Jul.
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EuroZone Aug. Industrial Production rose 0.9% MoM vs. 1.2% expected
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US Sep. Import Price Index out at 0.1% MoM vs. 0.2% expected
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US Sep. Advance Retail Sales out at -1.5% and +0.5% less Autos, vs. -2.1%/+0.2% expected.
THEMES TO WATCH – UPCOMING SESSION
(All times GMT)
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US Aug. Business Inventories (1400)
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US Minutes of Sep. 23 FOMC Meeting (1800)
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US Fed's Tarullo to Testify (1830)
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US Weekly API Crude Oil and Product Inventories (2030)
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New Zealand Sep. Business PMI (2130)
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New Zealand Q3 Consumer Prices (2145)
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Australia RBA's Stevens to Speak (0000)
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Australia Treasury Secretary Henry to Speak (0200)
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Japan BoJ Monthly Report (0500)
Market Comments:
Last night's Intel earnings release and this morning's JP Morgan earnings release pushed equities higher and the USD lower once again, as EURUSD reached above 1.4900 for the first time since August of 2008, before retreating again slightly ahead of the important US data. The Fed's Kohn was also out overnight reiterating the Fed's line on keeping interest rates low for a long period of time. The strong Intel report was considered important as an indicator for the holiday season, as computer makers will integrate Intel chip purchases from this quarter into their PC shipments aimed at Christmas shoppers. The JPMorgan results should be no great surprise as the banking system is currently rigged to ensure maximum profits to banks so they can shore up their capital reserves - borrowing for free and lending for much higher rates. Meanwhile, housing defaults and credit card delinquencies continue to mount and will do so until the wage and employment picture improves.
China's trade numbers
Risk appetite apparently also got a boost from China's export numbers, which declined at a far slower pace on year-on-year comparisons relative to recent months. Also interesting, the overall trade balance was far smaller than expected, likely because China's extreme stimulus measures have stimulated demand more than external demand has been stimulated in its export markets. This latest month's data shows the Chinese trade surplus shrinking once again, a phenomenon that should theoretically be putting less pressure on global imbalances, though this number doesn't take capital flows into account, and the heady rise in Chinese reserves suggest there is plenty of reserve diversification going on that is pressuring the EUR and other currencies higher vs. the USD.
JPY and interest rates
The JPY was weaker today after strangely moving stronger vs. the greenback in the Asian session as traders finally noticed the JPY-bearish implications of the sharp recent rise in interest rates. The US 10-year benchmark yield was unable to hold below 3.25% recently, which will make the case for a lower USDJPY a bit tough here in the short term unless we see a renewed rally in bonds. See today's chart for a bit more on the USDJPY action, as the technical setup for an end to the trend has become more compelling - though we need to see a decisive move above recent highs for confirmation.
Reality vs. Expectations redux...
The weekly US ABC confidence number is a reminder of the amazing and persistent dissonance in the US between reality vs. expectations. As we pointed out recently, this survey focuses more on how people are doing in the present tense than, for example, the monthly Conference Board confidence number, which is divided evenly into present situation and six-months expectations components. A relatively large drop in confidence as we are supposedly moving into recovery mode is a disconcerting. A look at previous cycles suggests that a reversal in the trend to higher unemployment is needed for confidence to improve - a rather common-sensical correlation.
Today's US Data
US Retail Sales were reasonably stronger than expected, but perhaps not enough to bolster the already rather strong move in risk appetite higher into the US open. Still, there seems to be little to nothing in the way of fundamental news to perturb the bull's confidence at present. Watch the FOMC minutes for potential insight into the extent of the split between the hawks and the doves.
Chart: USDJPY
USDJPY recently rallied strongly from new lows at 88.00, suggesting that the downtrend is tiring. The throwback sell-off and renewed rally today sets up an interesting formation and underlines the importance of the neckline-like 90.20-50 area on the chart, a move above which could trigger a large consolidation north of 92.00. The rise in long yields is somewhat supportive of a rally scenario as well. Short term, a dip back below 89.00 would neutralize the upside anticipation.
