– Not such a flash night on stock markets overnight, with Europe under pressure across the board. The FTSE fell 0.38%, the DAX was 0.35% lower and the weaker economies of Europe, France, Italy and Spain all came under heavy selling, down 1.13%, 1.77% and 1.56% respectively. The context around this is that the German ZEW survey of economic sentiment was slightly better than expected at 54.6, but the killer is the current situation of 28.7, which is even lower than last month’s moribund 29.7 – so Europe is still in a very dire economic situation.
– In the US, even a letter to Elizabeth Warren from Janet Yellen saying that rates would be low for a while didn’t help stocks in the US, which were down a little as the Dow and S&P were unable to hold onto the 16,000 and 1800 again. At the close, the Dow is down 0.06% to 15,967, the Nasdaq is 0.43% lower and the S&P 500 has dropped 0.20% to 1788.
– Closer to home, the SPI 200 remains under pressure following on from the ASX’s weak performance yesterday and the December contract is down 26 points overnight to 5339 bid. On the Bond boards, the 3’s are 2 points lower with the 10’s 2.5 points lower, reflecting the rise in US yields last night with the 10-year Treasury closing at 2.71%. German bunds were up 3 to 1.72% while gilts were unchanged at 2.56%.
– The OECD massively cut its growth forecasts for the globe overnight from 3.6% to 2.7% for this year and 3.6% instead of the 5.7% for next year. That is a big step down in just six months, with the big move driven substantially by some heavy rewriting of expectations for emerging market growth.
– That downgrade didn’t hurt the Aussie dollar as would be usual but it seems that the $5.9 billion of 20-year bonds that the AOFM issued yesterday might have something to do with the Aussie’s outperformance overnight when it ran to a 0.9447 high. It’s back at 0.9420 this morning but looking strong with the US dollar under pressure from news that the Chinese are liberalising the renmimbi (RMB) trade and going to move it more toward a free float through time. The RMB will end up as a real alternative to the US dollar as a reserve currency, which will also impact the Aussie dollar as well.
– Elsewhere on forex markets, the euro pushed higher again and sits at 1.3529 up 0.2% this morning – please see above on the ZEW survey and then wonder! GBP is largely unchanged at 1.6115, USDJPY is still trying to break higher but so far can’t and sits at 100.20.
– On Commodity markets, Bitcoin has been moving through a ridiculously large range over the past few days and traded through a 502-900.98 over the past 24 hours. It’s back at 700 at the moment. Elsewhere Nymex Crude rose 0.4% to $93.40, Gold was largely unchanged at $1274 oz, Corn rebounded from yesterday’s fall rising 1.58%, Wheat rose 1.25% but Soybeans fell 0.7%.
On the data front today in New Zealand we get PPI, the Westpac leading index of economic activity in Australia, Japanese trade data and a speech by RBA Assistant Governor Guy Debelle and Chinese leading indicators. Tonight we see BoE minutes, PPI in Germany and then US CPI, retail sales, business inventories and existing home sales.