Your morning market update, with falls across the board but some good news for the Yen.
– Interesting start to the week with liberalisation of the Yuan and interest rates and the announcement of the Shanghai Free Trade Zone competing with the collapse of the Italian Government and concerns about the shutdown of the US Government for trader’s top-of-mind status. The Chinese announcements are important and have very big long-run implications, especially for Australia and Australian business, but the pervading poor sentiment that flowed from Friday’s New York Session is likely to dominant in Asia today.
– Looking back to Friday, it was a continuation of the weakness we saw for most of last week on the stock market with the Dow falling 70 points or 0.46%, the Nasdaq falling 0.14% and the S&P 500 falling 7 points or 0.39% to 1692. According to the chartists, in technical terms, if the S&P 500 falls under the Friday session low this week then a bigger fall is in the offing. Given the weekend vote to delay Obama’s health law for 12 months, the chances of more weakness this week have grown.
– In Europe, the FTSE fell and the GBP rallied on BoE Governor’s hawkish interest rate comments. At the close of play the FTSE fell 0.8%, the DAX and CAC were largely unchanged and the Milanese stock exchange was knocked lower again as it became clear the Government was collapsing, posting a fall of 1.27%. In Madrid, stocks fell in sympathy, down 0.48% at the close.
– On rates markets, US 10’s are at 2.63%, Bunds rallied 6 points to 1.78% and Gilts were 4 points lower at 2.53%.
– On FX markets, as discussed above, Sterling rallied back above 1.61 and sits at 1.6246 this morning in Asia. The Aussie remained and remains under pressure from the risk-off meme and sits at 0.9314 this morning. Euro is at 1.3493, which is remarkable and shows how far the global financial system has come since 2010 when you take the collapse of the Italian Government into account. Which leaves the Yen, which in a world where the US Government is close to shutdown and the Italian Government has collapsed, is the member of the Big Three which should benefit most in trade this week.
– Closer to home the SPI200 futures closed down 13 points on the Sydney Futures exchange Saturday, while the 3- and 10-year bonds futures were 3 and 5 points higher respectively, suggesting a fall in yields of the same magnitude in trade today.
On the data front, this will be a big week, as the new month brings with it a raft of fresh data releases.
Today though, we see the BoK manufacturing BSI in Korea along with industrial output, New Zealand releases Building Permits and Japanese Industrial production and retail trade is released.
In Australia, the TD monthly inflation gauge is out this morning along with private sector credit, which I will be watching closely given recent house prices rise in Australia.
In China, we get the release of HSBC manufacturing PMI and then in Europe tonight we see import prices and retail sales in Germany, PPI and CPI in Italy, Mortgage Approvals in the UK and Trade Data in India before the Chicago PMI and Dallas Fed manufacturing index.
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