Mind The Gap; European Session Update Pre New York open

Sep 3 • Mind The Gap • 2064 Views • Comments Off on Mind The Gap; European Session Update Pre New York open

UK Posts More Optimistic Data; UK Construction Rises At Sharpest Level For Six Yearsbuilding-house

In the overnight/early morning Asian-Australasian session the announcement that the RBA base rate was kept at 2.5% was in line with market expectations. The accompanying narrative from the RBA’s governor was bullish the Australian economy. The main conclusion being that the RBA will stay their current course as the belief (within Australia’s central bank policy makers) is that the global economy is currently undergoing healing and growth.


Glenn Stevens, Governor: Monetary Policy Decision;

Overall, global financial conditions remain very accommodative, though the recent reassessment by markets of the outlook for US monetary policy has seen a noticeable rise in sovereign bond yields, from exceptionally low levels. Volatility in financial markets has increased and has affected a number of emerging market economies in particular. Notwithstanding the higher volatility, Australian institutions have ample access to funding markets. 

In Australia, the economy has been growing a bit below trend over the past year. This is expected to continue in the near term as the economy adjusts to lower levels of mining investment. The unemployment rate has edged higher. Inflation has been consistent with the medium-term target. With growth in labour costs moderating, this is expected to remain the case over the next one to two years, even with the effects of the recent depreciation of the exchange rate.

The Australian dollar has depreciated by around 15 per cent since early April, although it remains at a high level. It is possible that the exchange rate will depreciate further over time, which would help to foster a rebalancing of growth in the economy.


Spain’s jobless number remains constant

The Spanish unemployment number disappointed the market given that it printed a higher than than expected number. The economists polled had expected a fall of circa 5K, in fact the number of people registered as jobless in Spain in August only marginally declined from a month earlier. The number fell by just 31 people, the data from the Labour Ministry showed on Tuesday. August’s slight decline, however, marks the sixth successive month of falling figures, leaving 4.7 million people out of work.


Markit/CIPS UK Construction PMI; Sharpest expansion of construction output for almost six years in August

August data indicated another strong improvement in the overall performance of the UK construction sector, as highlighted by steep and accelerated expansions of both output and new business volumes. Construction companies also remain confident about the year-ahead outlook for business activity at their units, with around 46% of survey respondents expecting a rise and only 10% a reduction. Adjusted for seasonal influences, the headline Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI) registered 59.1 in August up from 57.0 in July and above the neutral 50.0 value for the fourth consecutive month. The latest reading indicated a sharp rise in total business activity and the fastest pace of output expansion in the construction sector since September 2007.


Tim Moore, Senior Economist at Markit and author of the Markit/CIPS Construction PMI;

The latest Construction PMI figures are yet another indication that the UK economy has performed impressively over the summer months. A steep upturn in civil engineering activity suggested that public sector demand has joined residential building as a key driver of construction output growth during August.

With overall output levels now rising at the fastest pace for around six years, it seems highly likely that the construction sector will provide another positive contribution to UK GDP in the third quarter of 2013.

New public sector infrastructure spending looks to have started making an impact on the ground, and this was a contributory factor behind the sustained construction sector job creation seen in August.


Market snapshot at 10:00 am UK time, Nokia shares rise 47%

No sooner is the ink dry on a massive telecoms deal; Vodafone selling its stake in Verizon for £85 bn and another huge telecoms deal appears with Microsoft announcing the takeover of Nokia, the phone manufacturer of the Lumia phones which utilizes the Microsoft mobile windows platform.

The majority of Asian Pacific markets rose in the overnight early morning session. The Nikkei closed up 2.99%, the Hang Seng closed up 0.99% whilst the CSI closed up 1.47%.

European equities are enduring mixed fortunes in the early part of the morning session. The European STOXX is down 0.21%, the UK FTSE is flat, the CAC is down 0.28% whilst the DAX is down 0.17%. The Athens exchange has bucked the trend currently up 1.42%, whilst the Istanbul exchange is down 0.97% at the time of writing.

Looking towards New York’s open the DJIA equity index future is currently up 0.74 at 14905, the SPX is up 0.95% whilst the NASDAQ equity index future is currently up 0.94%. These three key indices suggesting that USA markets will open in positive territory.

ICE WTI oil is up 0.18% at $106.99 per barrel whilst NYMEX natural is up 2.37% at $3.67 per therm. COMEX gold is down 0.61% at $1387.60 per ounce whilst COMEX silver is up 2.73% at $24.16 per ounce.


Focus on forex

The Nikkei index soared whilst in perfect negative correlation Japan’s currency slumped versus 14 of its 16 major currency peers after data showed the nation’s monetary base expanded by the most volume in over 40 years. The yen depreciated 0.3 percent to 99.67 per dollar early in the London session, after touching 99.70, the weakest level seen since Aug 2nd. Yen slid 0.1 percent to 131.20 per euro after dropping 1 percent yesterday. The dollar advanced 0.2 percent to $1.3162 per euro after reaching $1.3161, the strongest since July 22nd.

Australia’s dollar rose after the nation’s Reserve Bank held its benchmark rate unchanged at 2.5 percent and failed to deliver narrative regarding any further monetary easing. The central bank’s decision was in line with estimates of all the economists Bloomberg polled. The Aussie rose 0.6 percent to 90.30 U.S. cents late in the Sydney trading session, after climbing 0.9 percent yesterday. It touched 90.48, the highest level seen since Aug 26th. The currency gained 0.9 percent to 89.94 yen after reaching 90.06, the most since Aug 19th. The kiwi rose 0.2 percent to 78.27 U.S. cents after jumping 1.1 percent yesterday. It was up 0.5 percent to 77.95 yen.

Sterling appreciated 0.4 percent to 84.57 pence per euro early in the London session, the strongest level witnessed since May 21st. Sterling gained 0.2 percent to $1.5578.  Sterling rose for a fifth day versus the euro before the Markit report predicting that U.K. construction data increased for a fourth month in succession in August was published.

The U.S. Dollar Index which tracks the greenback’s performance versus a basket of 10 major currencies, gained 0.2 percent to 1,037.28, the highest since July 16th.

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