Markets sell off moderately then recover as yen rises versus all of its major peers

Mar 11 • Morning Roll Call • 2122 Views • Comments Off on Markets sell off moderately then recover as yen rises versus all of its major peers

shutterstock_68217724Initially, shortly after the opening bell on Monday, the USA indices suffered a rapid sell off as investors digested the news that Chinese exports had fallen spectacularly – by 18.1% according to the latest reading from the official Chinese stats body. However, in a relatively slow news day the indices recovered somewhat with the DJIA closing down by just over 0.20% on the day. European indices experienced a mixed two sessions with the majority of the main indices closing down.

From North America we had some encouraging news in the form of house starts in Canada where the rate of building moved up slightly. Also the New York Fed survey showed that the expectation of finding a new job inside three months, should you lose your current one, was now at 46%. This is above the 2013 levels.

Investors were left slightly puzzled by why sterling fell versus nearly all of its major peers in the afternoon session as there didn’t appear to be any stats to back the fall up. However, news later emerged that the ONS will be delaying some of its data over the next few days which subsequently fed rumours that it’s not as good as expected, hence the quick sell off during a relatively quiet news day. Moreover a member of the BoE MPC suggested that the currency’s value may be affecting export opportunities.

A member of the ECB did cause quite a stir in the markets by suggesting that he wasn’t entirely happy with the current level of the euro versus its major peers, going so far as to suggest that measures such as QE could be considered. French European Central Banker Christian Noyer voiced concern on Monday over the appreciation of the euro and said he shared the view of his German counterpart on policy options that could be used by the euro zone’s central bank.

New York Fed Survey Shows Consumer Expectations for Labor Market and Household Financial Conditions Remain Steady

The Federal Reserve Bank of New York today released results from its monthly Survey of Consumer Expectations (SCE) which contains insight into Americans’ views on inflation, prices, the labour market and household finance. February results show that consumer inflation expectations rose slightly in February at both the one-year and the three-year ahead horizon. Median earnings growth expectations remained above 2013 levels. The mean perceived chance of finding a job in three months, if one were to lose their current job today, declined slightly to about 46 percent. Household income and spending growth expectations remained essentially unchanged.

February 2014 Housing Starts in Canada

Housing starts in Canada were trending at 192,236 units in February compared to 191,513 in January, according to Canada Mortgage and Housing Corporation (CMHC). The trend is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) 1 of housing starts.

The trend in housing starts remained stable in February for the seventh consecutive month. Since August 2013, the trend has essentially remained in the 185,000 to 195,000 range, with month-to-month variations generally of two per cent or less. This is in line with CMHC’s outlook calling for a stable housing market in 2014.

ECB’s Noyer not happy with euro’s rise

French European Central Banker Christian Noyer voiced concern on Monday over the appreciation of the euro and said he shared the view of his German counterpart on policy options that could be used by the euro zone’s central bank. “I fully agree with Jens Weidmann that the suspension of sterilisation is one of the tools we may use if needed,” Noyer, head of the Bank of France and a member of the ECB’s governing council alongside Bundesbank chief Jens Weidmann, told Bloomberg at a conference in Paris.,concerning appreciation of the euro’s exchange rate.

Market snapshot at 10:30 PM UK time

The DJIA closed down 0.21% on the day, SPX down 0.05%, NASDAQ down 0.04%. The euro STOXX down 0.08%, CAC up 0.10%, DAX down 0.91% and the UK FTSE down 0.35%.

The DJIA equity index future is down 0.03%, SPX future down 0.03% with the NASDAQ future flat. The euro STOXX future is down 0.19%, DAX future down 1.00% CAC future up 0.14% with the UK FTSE future down 0.55%.

NYMEX WTI oil finished the day down 1.42% at $101.12 per barrel, NYMEX nat gas up 0.71% at $4.65 per therm, COMEX gold flat at $1341.50 per ounce with silver down 0.09% at $20.91 per ounce.

Forex focus

The yen gained as much as 0.6 percent to 142.44 per euro before trading little changed at 143.30 late in New York. The Japanese currency traded little changed at 103.26 per dollar, and climbed 0.5 percent to 93.14 per Australian dollar. Europe’s shared currency traded at $1.3875. The Aussie dropped 0.5 percent to 90.23 U.S. cents after advancing to 91.33 cents on March 7th, the strongest since Dec. 11th. The pound weakened 0.4 percent to 83.37 pence per euro and fell 0.4 percent to $1.6645.

The yen gained versus 10 of its 16 major peers as appetite for riskier assets cooled after China reported the biggest trade deficit in two years and the slowest rise in consumer prices in 13 months.

Sterling fell as Bank of England Deputy Governor Charlie Bean said further strength in the currency may hamper the U.K.’s economic recovery. Australia’s dollar dropped against most major peers after China, the nation’s biggest trade partner, said March 8th exports slid. Ukraine began military drills as Russian forces tightened their hold on the Crimean peninsula.

The Aussie has slumped by 14 percent in the past 12 months, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted indexes, amid signs of a slowdown in China. The euro has gained 6.9 percent, while the dollar declined 0.6 percent.

Bonds briefing

U.S. 10-year yields dropped one basis point, or 0.01 percentage point, to 2.78 percent at 5 p.m. New York time after falling as much as three basis points and rising one. The 2.75 percent security due February 2024 gained 3/32, or 94 cents per $1,000 face value, to 99 3/4. The yield advanced to 2.82 percent on March 7, the highest level since Jan. 23. It was 115 basis points more than 10-year German bunds, the most in more than seven years.

Treasury three-year notes yielded the most since September in pre-auction trading before the U.S. sells $30 billion of the securities as investors bet the economic expansion is gaining traction.

Fundamental policy decisions and high impact news events for March 11th

Tuesday sees the publication of the Australian NAB confidence survey, expected in at 8. The BOJ will publish a monetary policy statement, as well as preliminary tool orders expected in at similar levels to the 40.3% in the previous month.

Germany’s stats agency publishes their trade balance, expected in up €19.3 bn for the month. China’s new loans are expected in at 730 bn up for the month. From the UK we get manufacturing production figures expected to show a 0.3% rise on the month. Industrial production is also expected in at 0.3% up, whilst the UK’s BoE conducts and attends inflation hearings. The UK also conducts a ten year bond auction. ECOFIN meetings are also held throughout the day.

From the USA the NFIB small business index is published, predicted to deliver a reading of 95.3. JOLTS job openings are anticipated in at 4.03 million. Jolts are the number of job openings during the reported month, excluding the farming industry. It’s released late, but can impact the market because job openings are a leading indicator of overall employment. Wholesale inventories are published for the USA expected to come in at 0.5% up for the month.

In the UK a GDP estimate is published by the NIESR, it is expected to come in at 0.8% for the quarter. From Australia the Westpac consumer sentiment index is published, with the anticipation that the reading comes in ahead of the -3% previously.

Japan publishes the print on the BSI manufacturing index, expected in at 11.3%, tertiary industrial activity is expected in at 0.7% up, with CGPI expected in at 2.2% year on year.
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