China’s commitment (through its Plenum meeting of last week) to introduce wide-ranging reforms continues to be the dominant force stoking up global investor sentiment. Shares of Chinese companies listed in Hong Kong were up another 1.8 per cent overnight to reach their highest witnessed since early March, extending Monday’s 5.7 per cent climb.
The UK’s financial regulator is allegedly probing the use of private accounts by foreign exchange traders amid allegations they trade their own money ahead of clients orders, in a serious twist in the global probe into possible currency market manipulation. The Financial Conduct Authority has asked several banks to investigate whether or not traders used undeclared personal accounts.
RBA Monetary Policy Meeting Minutes
Data released over the past month suggested that growth in Australia’s major trading partners remained around the average of the past decade. The pace of growth in China had increased a little through the year and was consistent with the Chinese Government’s target of 7½ per cent. Consumption and investment spending continued to grow strongly, with the latter contributing to strong demand for resources imports. Total social financing flows had picked up after slowing in the middle of the year. The Japanese economy continued to grow, although on the basis of recent data at a slower rate.
Icahn and Plossser send equity markets in Europe and USA into reverse
Europe’s major stock markets are all in the red in early trading, as yesterday’s optimism fades. Having witnessed the US Dow Jones temporarily hit 16,000 and the German DAX hit fresh record highs yesterday, investors are now considering if the rally is sustainable. Two factors are pushing down shares in early trading…
A very influential investor, Carl Icahn, warned yesterday that the equity markets could fall substantially, he suggested that the recent corporate results in the USA owed more to the current record low interest rates and quantitative easing as opposed to strong and effective management. In his opinion the markets could be heading for a “big drop”. What he failed to state is whether or not in his opinion this drop would come as a consequence of the inevitable winding down of the Fed’s monetary easing programme.
Charles Plosser, who is the head of the Philadelphia Federal Reserve, declared yesterday evening that the Fed should actually set a final target for its bond-buying programme, rather than simply continuing their open ended QE until the USA economic conditions look improved. He’s suggested this action before, as have other Fed Reserve heads, but so far Ben Bernanke has avoided this action and in Janet Yellen’s testimony last week, to be considered for the main role of a Fed chairman, she avoided putting a time scale or monetary limit on what many investors and analysts have termed “Q.E. to infinity”.
Market snapshot at 10:00 am UK time
The ASX 200 closed down 0.59% overnight, the CSI 300 down 0.69%, Hang Seng was flat, Nikkei down 0.25%. European indices are mixed; STOXX down 0.60%, CAC down 0.67%, DAX down 0.37%, UK FTSE down 0.59%. COMEX gold is up 0.17% at $1274.40 per ounce. The MSCI Asia Pacific Index of shares was little changed after climbing 3.2 percent over the past three days.
The DJIA equity index future is currently down 0.04%, the SPX down 0.08%, the NASDAQ equity index future is down 0.09% all three futures suggesting that the USA bourses will open in negative territory this afternoon.
WTI for December delivery slid up to 28 cents to $92.75 a barrel in electronic trading on the New York Mercantile Exchange and was at $92.90 late Singapore time. It decreased 81 cents yesterday to $93.03, the lowest level seen since May 31th. West Texas Intermediate oil fell for a second day as investors weighed the prospect that the U.S. will taper economic stimulus.
Forex focus
The dollar fell 0.1 percent to 99.85 early in London adding to yesterday’s 0.2 percent decline. It slid 0.1 percent to $1.3516 per euro after yesterday touching $1.3542, the weakest since Nov. 6th. Japan’s currency gained 0.1 percent to 134.96 per euro.
The U.S. Dollar Index, which monitors the greenback versus its 10 major counterparts, lost 0.1 percent to 1,014.84 from yesterday, when it touched 1,013.49, the lowest since Nov. 7th. The dollar fell for a second day versus yen on speculation that Federal Reserve speakers including Chairman Ben S. Bernanke will reiterate economic growth isn’t sufficient to taper the $85 bn per month stimulus.
The kiwi slid 0.3 percent to 83.06 yen, while the Aussie fell 0.2 percent to 93.61 yen. The pound was little changed at $1.6124 London time after reaching $1.6149 yesterday, the highest since Oct. 28. Sterling was at to 83.91 pence per euro. The pound was 0.2 percent from a three-week high against the dollar before the Bank of England publishes minutes of its November meeting this week.
Bonds
Benchmark 10-year yields were little changed at 2.68 percent early in London time. The yield is below its average over the past decade of 3.51 percent. The price of the 2.75 percent note due in November 2023 was 100 19/32. The yield on two-year notes was at 0.29 percent. Treasury market volatility fell to near a record low on speculation Federal Reserve Chairman Ben S. Bernanke will give support to the case for maintaining bond purchases in a speech today.
Today’s UK gilts sale of 3.75 billion pounds ($6.04 billion) of 2023 bonds will be followed by an auction of 4.75 billion pounds of debt securities due in 2019 on Nov. 21st. The U.K. last sold 10-year gilts on Oct. 3rd at an average yield of 2.742 percent, down from 2.976 percent at an auction on Sept. 12. Gilts lost 2.7 percent this year through yesterday. German bonds dropped 1 percent and U.S. Treasuries declined 2.1 percent.
