Markets whip-sawed across asset classes

Hard to know where to start this report with extremely whippy and severe movements across asset classes overnight. It was a wild night for all sorts of reasons, not the least being the siege in Sydney’s CBD that was ended in the early hours of this morning with a sad loss of life for some innocent people.

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Hard to know where to start this report with extremely whippy and severe movements across asset classes overnight. It was a wild night for all sorts of reasons, not the least being the siege in Sydney’s CBD that was ended in the early hours of this morning with a sad loss of life for some innocent people.

Yesterday’s MYEFO update came and went with little to no market impact, most of the headlines well anticipated by markets from leaks. The AUD/USD has been trading toward the lower end of recent ranges in the lower 0.82s overnight against the USD that has not made further gains in a volatile session.

Oil has been one centre of attention of markets overnight, crude prices starting the week on a positive note, WTI rising nearly 3% at the open, before capitulating, now down 3% for the session. All that weighed on equities, the Eurostoxx 600 down 2.19%, with the Bank of Greece Governor adding to the gloom by saying that the “Greek crisis has taken serious proportions”. US stocks recanted opening gains, the S&P 500 down 1% mid-session before recovering most of those losses in the final part of the session.

US data was mostly strong. While the regional Empire State manufacturing report for Dec fell back to negative, industrial production rose a stronger than expected 1.3% with capacity utilisation the highest since 2008. The NAHB Home Builders’ Index gave up a point to a still strong 57.

In the currency world, selling of mainly oil-linked currencies looks to have spread to emerging markets, with some EM currencies falling to record lows against the USD. The Turkish lira is 2.9% weaker, aided by a rising political risk premium. However, as my BNZ colleague Raiko has noted this morning, that hardly holds a candle to the Russia rouble, which is massive 10.8% weaker for the day, taking its year-to-date loss to 48.8%. It traded in an incredible six big figure range overnight. The USD/IDR jumped, hitting a 16 year high of 12714, symptomatic of non-Japan Asia currencies at multi year lows.

Amongst the majors, the yen has been the strongest performer, given the big benefit to its terms of trade from falling oil/ energy prices.

Coming up today/tonight

Out today is the December RBA Board Minutes, though we doubt they will shake the markets up too much given Stevens’ extensive AFR interview last week. There is also the weekly ANZ-Roy Morgan Consumer Sentiment index at 9.30, having fallen 3.1% the week before. The RBA’s Guy Debelle is speaking to a Finance and Banking Conference at 11.15; no speech title available.

New Zealand has Budget update this morning, the Government’s Half-Year Economic and Fiscal Update (11.00 AEDT) this morning. It might well signal that its long-expected core operating surplus for 2014/15 is now touch and go (on lower dairy income ahead), but should, in general, remain upbeat about the medium-term path of the economy and fiscal accounts.

The flash HSBC China manufacturing PMI for December is out today at 12.45. Euro-zone Manufacturing PMIs are being released tonight, and for the zone is expected to improve somewhat from 50.1 to 50.5. Germany’s ZEW Investor Survey is also being released tonight. The US releases November Housing Starts and Building Permits along with the Markit estimate of the US Manufacturing PMI for December.

Overnight

Oil falls further: Eurostoxx 600 -2.2%, Dax -2.7%, CAC -2.5%, FTSE -1.9%. Dow -62 points to 17,219, -0.4%, S&P 500 -0.4%, Nasdaq -0.4%, VIX 20.61 -2.2%. Shanghai +0.5%, Mumbai +0.5%, Nikkei 225 -0.8% and ASX 200 -0.1%; ASX SPI futures this morning -0.7%. US bond yields: 2s at 0.59% (5), 10s at 2.12% (+3). WTI oil at $55.40 (-4.2%), Brent at $60.52 (-2.2%), Malaysian Tapis (yesterday) $65.72 (+0.3%). Gold at $1198.40/oz (-2.0%). Base metals: LME copper -1.4%, nickel -1.3%, aluminium -0.7%. Iron ore $69.1/t +0.1% Chinese steel rebar futures +0.2%. Soft commodities spot futures: wheat +2.1%, sugar -0.1%, cotton +0.2%, coffee 2.7%. Euro Dec 14 CO2 emissions at €6.89/t (3.5%).

US Industrial production (Nov) +1.3% (L: -0.1%; E: 0.7%); NAHB Housing Market Index (Dec) 57 (L: 58; E: 58); Empire State Manufacturing (Dec) -3.58 (L 10.16; E: 12)

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