A busy data slate today could make for an interesting session


MAJOR HEADLINES – PREVIOUS SESSION

  • CA Sep. Retail Sales out at +1.0% m/m vs. +0.6% expected and revised +1.0% prior

  • CA Sep. Retail Sales ex-autos out at +1.1% m/m vs. +0.4% expected and revised +0.7% prior

  • US Oct. Chicago Fed Activity Index out at -1.08 vs. revised -1.01 prior

  • US Oct. Existing Home Sales out at +10.1% m/m vs. +2.3% expected and revised +8.8% prior

  • US Oct. Existing Home Sales out at 6.10 mln vs. 5.70 mln expected and revised 5.54 mln prior

  • AU Sep. Conference Board Leading Index out at +0.3% vs. revised +1.5% prior

  • JP Oct. Supermarket Sales out at -5.2% y/y vs. -2.4% prior


THEMES TO WATCH – UPCOMING SESSION

(All times GMT)

  • GE Final Q3 GDP (0700)

  • Swiss Consumption Indicator (0700)

  • Swiss Employment (0815)

  • Sweden PPI (0830)

  • GE IFO Surveys (0900)

  • UK Business Investment (0930)

  • UK BOE’s King, Tucker, Fisher, Sentance, Posen to speak (0945)

  • EU Industrial New Orders (1000)

  • US Q3 GDP Revision (1330)

  • US S&P/Case-Shiller House Prices (1400)

  • US Consumer Confidence (1500)

  • US FHFA House Price Index (1500)

  • US FOMC Minutes (1900)

Market Comments:

A combination of earlier dovish Fed comments and strong US economic data releases helped to pin the dollar down after its slide during the Asian session yesterday. Existing home sales in October showed a phenomenal jump from the previous month, up 10.1% following a revised 8.8% jump the previous month. The kneejerk reaction was to bid up equities, sell the dollar and bonds but later the market reversed tack as it was thought the increase was more a result of first-time buyers rushing to take advantage of the government’s tax breaks (at the time it was not certain whether Congress would extend the Dec 1 deadline or not). Elsewhere on the data front, EU PMIs crept higher (manufacturing 51.0 vs. 50.7, services 53.2 vs. 52.6) and Canada retails sales blasted forecasts out of the water (+1.0% m/m vs. +0.6% expected but the Chicago Fed national activity Index a marginal disappointment at -1.08 vs. revised -1.01 prior.

Despite the kneejerk reaction, momentum in currency markets was sporadic. EUR once again baulked at the 1.50 resistance levels and other pairs posted only marginal gains from the Asian handover. The exception was gold again, which powered to another all-time high above 1,173, in part helped by the revelation that Russia had increased its gold holdings by half a million ounces in October as part of a perceived reserve diversification.

However, as we have seen so often in the past, the risk rally ran out of steam into the close and Asia took over with the dollar off it slows. The day started off well but risk appetite was slowly eroded as equity markets drifted into the red and the dollar managed another 0.1% rally against the index.

Financial sector counters reacted negatively to an FT article outlining details of a study from S&P on the strength of banks’ balance sheets in light of pending revamped capital adequacy ratio rules. In the report, the conclusion was that HSBC was the best capitalized bank while the likes of UBS, Citigroup and a number of top Japanese banks were among the worst. Japanese banking shares were the major culprits in pulling the Nikkei lower. The raising of capital was also an issue for Chinese shares with Bank of China hitting the headlines as it emerged that it was mulling various ways to raise capital. In a further negative note, a statement from ratings agency Fitch said that weaker loan quality may put pressure on Japan’s “mega” banks’ performance and in turn their capitalization. In all, this was the cue for a general risk-off sentiment in the latter half of the Asian session.

It is a busy data session today with Europe first off. German GDP revisions are not expected to provide too much of a surprise, final numbers expected as per provisional data, but the IFO surveys may provide EUR with enough ammunition to finally take on the 1.50 handle again (though 1.5064 the next hurdle behind that). BOE’s King and his fellow MPC members are before parliamentary committee to testify on the latest inflation report and may either confirm or refute the market’s dovish interpretation of the report.

Heading into the US session, we have the first revision to Q3 GDP data with a rather hefty downward adjustment expected. House prices are also in focus with both S&P/Case-Shiller and FHFA indices due. FOMC minutes will grab the headlines late in the session with the market looking to scrutinize the commitment for low rates for an extended period. Updates to forecasts for growth, unemployment and inflation could also provide near-term inputs.