Markets Today: Super Tuesday

With US markets closed in observance of Martin Luther King Day, the relatively quiet overnight session is probably not reflective of the current collective mood.

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With US markets closed in observance of Martin Luther King Day, the relatively quiet overnight session is probably not reflective of the current collective mood. Hence Super Tuesday is all about China which has the potential to set the mood for the rest of the week with a big set of data releases including Q4 GDP figures (see more below).

Yesterday China’s Shanghai and Shenzhen managed to end the day marginally in positive territory, however the start of the week for the rest of Asia was a bid softer with Hong Kong’s Hang Seng and Japan’s NIKKEI the worst performers down 1.45% and 1.12% respectively.

The start of the European session saw equities markets move higher, but the lack of data releases meant that oil was the only game in town. Brent and WTI oil briefly traded above the $29 mark, but then drifted lower effectively erasing all the gains for the session. The Euro Stoxx index ended the day down by 0.58% and the FTSE100 was -0.42%. Brent closed at $28.6(-1.32%) and WTI at $28.94 (-1.6%).

In currencies, the USD is stronger against all G10. The AUD and SEK are at the top of the leader board practically unchanged (-0.02% and -0.04%) while the NOK is at the bottom, down 0.79%.

In bonds, while the US Treasury market was closed, 10y Bunds ended the day little changed at 0.537% and 10y UK Gilts were down 3bps to 1.689%. UK Gilts outperformance was aided by BoE’s Gertjan Vlieghe comments stressing that he was “patient” on interest rates and wants to see evidence of stronger price pressures before tightening policy.

Finally in commodities, gold is practically unchanged at $1088.9, iron ore is up 3.8% to $42.7, its third consecutive day of gains and copper has continued it miserable run, down another 2.1% ($4327.5), a new six year low.

Coming Up

We have a quiet day in terms of data in Australia with the weekly consumer confidence index the only scheduled release.

In offshore markets it’s all about China, but unlike what we have seen since the start of the year, today’s focus should be (hopefully) on the real economy rather than the currency or equity market. At 1 pm AEDT China’s National Bureau of statistics will release its Q4 GDP estimate along with Industrial Production, Fixed Asset Investment and Retail sales (all three December prints).
Bloomberg is currently showing China’s Q4 GDP median estimate at 6.9 %yoy, unchanged from the previous quarter.

Interestingly, however, the distribution of economists’ forecasts shows a tail to the left with the lowest forecast at 6.4%. Our best guess is that we will get a print close to 7%, meeting the government’s target for the year, but doing little to dissuade the sceptics on the validity of the data. Industrial production is expected to decline from 6.2% to 6.0% in December, mainly due to unfavourable base effects. Retail sales and fixed asset investment are expected to remain steady at 10.7% and 10.2% respectively and little changed from the previous month.

In Europe we get Germany’s final CPI print for December along with the ZEW survey of financial analysts for January and given analyst bias toward the stock market, a soft print is expected. The euro-are current account and construction output figures are also due for release, but usually they are not market moving. Across the Channel, the UK releases its December CPI print and consensus expectations are for a flat outcome.

The NAHB homebuilders survey for January is the only notable data releases in the US. Bloomberg is currently showing consensus expectations for an unchanged print of 61, suggesting further upside for the housing market in 2016. We also get US TIC treasury data for November, it would be interesting to see to what degree foreign officials continued to sell US Treasuries in November and also to what degree this selling was countered by foreign private buyers.

Later tonight the IMF releases its January World Economic Outlook update covering key economic projections as well an assessment on the risks to this outlook.

We have no Fed speakers until after the FOMC meeting next week and in terms of Q4 earnings tonight we get Bank of America, IBM, Morgan Stanley and UnitedHealth.

Overnight

EuroStoxx ended -0.58% while US Markets were closed. On commodity markets, Brent crude oil -1.11% to $28.62, gold-0.2% to $1,089, iron ore +3.8% to $42.66. AUD is at 0.6862 and the range was 0.6831 to 0.6928

Good luck,

For full analysis, download report:
Markets Today: 19 January 2016 (PDF, 338KB)

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