Markets homing in on the Euro

The US$ ended last week on a strong note and started the week with more momentum, aided by further Euro weakness. The Greek election has come and gone with anti-austerity Syriza Party winning the largest number of seats with its young leader Alexis Tsipras the winner.

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The US$ ended last week on a strong note and started the week with more momentum, aided by further Euro weakness. The Greek election has come and gone with anti-austerity Syriza Party winning the largest number of seats with its young leader Alexis Tsipras the winner.

The Athens stocks market is down 3.20% overnight. Unsurprisingly, Greek yields have spiking in the first part of this week with pressure on Greek liquidity, along with a much weaker Euro then where we finished at the end of last week.

The Euro is trading at 1.1270 this morning having been as low as testing 1.11 yesterday. Selling however was reversed overnight after the release of the German Ifo Survey for January revealed some improvement in business activity in Europe’s largest economy provided some support, following up on the release of the preliminary EZ PMIs for Jan released Friday that depicted some European economic improvement at the start of the year.

Markets now wait for details on Tsipras’s policies and how much compromise he is willing to embrace in his dealings with international creditors. Overnight, while the Athens stock market is down, other European equity markets rose, including those in Milan, Madrid and Lisbon. Perhaps the market rightly or wrongly is pinning some hopes on Mr Tsipras being more conciliatory. In any case, the market will be paying close attention to news that could well see more Euro volatility for now at least.

While the Euro has come in for some predictable selling in recent sessions, so has the AUD/USD, to the point where the AUD/EUR rate is lower this morning than the rate prevailing at the end of last week.

A large decline in the price of iron ore in China yesterday did not help, the price of spot iron ore to Qingdao cif 62% down a large $US2.88/t to $63.54/t, the lowest in this cycle and since post-GFC levels in early 2009. LME copper prices have closed higher overnight, but in volatile session with Dr. Copper down 3.3% earlier in the session.

There has been no data of special market sensitivity out of the US overnight, but a massive snow storm that is due to hit the North American seaboard is getting a lot of airplay. Of course it was a run of especially severe cold weather that deflected the US economy off course for a time in the first part of last year. This may also playing into some nerves of US$ bulls in the lead up to the FOMC later this week with near memories on weather effects from last year urging some caution.

Coming up today/ tonight/ this week

Two releases locally today ahead of the CPI tomorrow. First the weekly ANZ-Roy Morgan Consumer Sentiment weekly Index at 9.30, having ticked higher last week and a higher relative level than its monthly W-MI counterpart that’s below its long term average.

More importantly, at 11.30 there is the NAB monthly Business Survey for December. Reflecting on the most recent surveys at the end of last year, the NAB Survey revealed a surprisingly large rise in the Business Conditions index in October with a part subsequent payback in November. Business Confidence however has been pretty consistently been pushing lower since July.

Tonight we get Q4 UK GDP with some key US partials due, including durable goods orders, Case-Shiller house prices, New Home Sales and the Conference Board’s Consumer Confidence index for Jan, whether it will match the big step up in the UoM index and what it says about US consumers’ job market perceptions.

Tomorrow is the Aust CPI with a 0.1% decline in headline CPI and 0.4% for underlying. Later this week we have the FOMC, the RBNZ with the first RBA meeting for the year next Tuesday.

Overnight

Post Greek election Euro weakness halted for now: Eurostoxx 600 +0.5%, Dax +1.4%, CAC +0.7%, FTSE +0.3%. Dow +1 points to 17,674, +0.0%, S&P 500 +0.0%, Nasdaq +0.2%, VIX 15.84 -4.9%. Shanghai +0.9%, Mumbai +0.9%, Nikkei 225 +0.3% and ASX 200 +0.9%; ASX SPI futures this morning +0.3%. US bond yields: 2s at 0.51% (3), 10s at 1.82% (+2).

WTI oil at $45.50 (-0.2%), Brent at $48.52 (-0.6%), Malaysian Tapis (yesterday) $47.77 (-3.4%). Gold at $1279.40/oz (-1.0%). Base metals: LME copper +1.1%, nickel +2.8%, aluminium +2.6%. Iron ore $63.5/t -4.3% Chinese steel rebar futures -0.3%. Soft commodities spot futures: wheat -1.4%, sugar +1.2%, cotton +2.1%, coffee -0.4%. Euro Dec 14 CO2 emissions at €6.93/t (0.7%). The AUD/USD is 0.7924 now.

German Ifo Survey (Jan) 106.7 (L: 105.5; E: 106.5)

 

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