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Daily FX Market Commentary

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There have been modest movements in major currencies this morning

Mon, Nov 2 2009, 08:19 GMT
by Danske Research Team

Danske Bank A/S

Key news

• US equities declined on the back of weaker US economic data for the housing market and lower-than-expected consumer spending. However, US bond yields declined some 10bp in the long end of the curve.
• Asian markets followed the move from the US markets despite an improvement in Chinese PMI data. CIT, one of the oldest commercial lenders in the US, has filed for Chapter 11.
• There have been modest movements in major currencies this morning. SEK and NOK have been stable in Asian trade.

Markets Overnight

US equity markets posted their biggest one-day decline since May on Friday on the back of weaker-than-expected housing market data as well as weaker-than-expected consumer spending. New home sales declined unexpectedly in September, while personal consumption declined 0.5% in September and consumer confidence also declined. These softer-than-expected data came after the stronger-than-expected US GDP data for Q3 and reversed much of Thursday’s positive sentiment.

As usual, what was negative for equities was positive for US bonds; yields declined some 10bp in the long end of the yield curve on Friday.

The Asian economies seem to be handling the crisis better. Yesterday, Chinese manufacturing data for October showed that the nation’s economic recovery is strengthening as PMI in the manufacturing sector rose to 55.2, the highest level in 18 months and above expectations of 54.

Despite the positive data from China, the Asian equity markets have followed the move from US markets with most indices down more than 1-2% this morning. Furthermore, one of the oldest commercial lenders to smaller enterprises in the US, CIT, filed for chapter 11. CIT had listed USD71bn in assets and USD65bn in liabilities. The bankruptcy is the fifth-largest by assets. The bankruptcy is likely to make it harder for start-ups and small businesses to lend money as CIT lent across many sectors.

In the FX markets the dollar has weakened against the euro and rebounded a little against the yen, but movements have been modest this morning. SEK and NOK have been stable against the euro after the significant decline on Friday, when both currencies weakened against the euro on the back of the decline in equity prices.

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Published on  Mon, Nov 2 2009, 08:27 GMT