Market Highlights:
- Petrol Giants Outweighed by Consumer Confidence Yesterday
- Markets Heard Carney the First (and the Second) Time
- Equities Lead Currencies into Risk Adverse Play this Morning
Petrol Giants Outweighed by Consumer Confidence Yesterday
The strength in petrol giants Exxon and Chevron on the back of strong BP results managed to push the DOW ever so slightly into the black yesterday, though the TSX, S&P 500, and NASDAQ were all decidedly down. This marked the third straight day of losses for the S&P and NASDAQ, a slide led primarily by profit-taking as well as the surprisingly weak October US Consumer Confidence number, which came in at 47.7 versus a forecast 53.7. The data highlighted concerns about continuing weakness in the American job market, and in turn raised doubts about the American consumer’s ability to generate growth in the economy.
It’s hard to imagine a US recovery making any meaningful headway while unemployment is still rising. This, of course, lends credibility to the theory that the recent risk-on run in equities may have been amplified by the liquidity pumped into the markets by central banks. When the central banks tighten up the purse strings, there is a real concern that equities and other “risky” assets will pull back. Tomorrow’s US Unemployment Claims are expected to come in at 522K, and with all the unemployment talk in the markets this week, expect a weaker number to fuel the risk-adverse fire.
Markets Heard Carney the First (and the Second) Time
The Loonie found little reason to move one way or the other yesterday despite plenty of opportunities to do so. Bank of Canada Governor Mark Carney stood before the Standing Committee on Finance yesterday and essentially repeated what he had already said twice last week. In his opening statements he noted that the Canadian economy had begun to recover, supported by the BoC’s various policies and stimulus packages. Furthermore, he noted, household wealth, financial stability and general business and consumer confidence in the economy were up. However, as before, he took aim at the Loonie, now down over four cents from where it was this time last week. Again Carney highlighted how the CAD’s strength put Canada’s resumption of growth in jeopardy… and the markets yawned. Carney is at Parliament again today, though this time he is talking to the committee on Banking, Trade, and Commerce. Expectations are for more of the same.
While Carney repeating himself for the third time isn’t typically the kind of thing that moves the markets, surprise bad data out of the US and equity sell-offs usually are. The CAD once again sat this round out, and whereas last week, when many currencies were taking ground away from the Greenback, yesterday they gave back. With many equity indices off yesterday around the world, currencies like the EUR, AUD, and NZD were down against the USD. The Loonie, on the other hand, traded rather horizontally, again not sure which way the prevailing wind was blowing. At this point in time USDCAD is running into resistance from the trend line established in the March move away from the 1.31 level. Any substantial move though this resistance could see the pair move back up to the 1.0950-1.1000 region. A break below the support around 1.0500 is required before any serious push towards par can be considered again.
Equities Lead Currencies into Risk Adverse Play this Morning
The overnight Asian trading session saw the Hang Seng and Nikkei both down over a percent, which, along with weaker-than-expected German Import prices, cued the CAC40, FTSE, and DAX to follow their Asian contemporaries down. This, of course, leads currencies into another day of risk aversion. The USD and JPY are, as expected, the big winners on the day so far, with most of the majors conceding to them—CAD included, this time.
It seems the risk aversion play is in vogue once again: a moderately better-than-expected Core Durable Goods Orders reading at 0.9 month over month (versus an expected 0.6) wasn’t enough to make investors believe. The TSX, DOW, NASDAQ, and S&P 500 are all in negative territory this morning, taking oil and most commodities (excluding gold) with them. New Home Sales are just out and adding further weakness. The actual number came in at an annualized 402K versus the expected number of 443K.
The other piece of potentially market-moving data on the docket for today is the Royal Bank of New Zealand’s Cash Rate announcement and accompanying statement. Expectations are for a hold of the current 2.50% through until the end of 2009. Emphasis will surely be placed on the statement that follows the announcement, as markets will be looking for clues about how the RBNZ’s thoughts on the Kiwi have changed in the last month.
Have a great day.
By David Starkey, FX Trader
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