November 30, 2015

Markets Today: On your marks…..

US markets were open on Friday, though more in body than spirit. The major indices were little changed.

US markets were open on Friday, though more in body than spirit. The major indices were little changed.  The one big stock market mover on Friday was China, the Shanghai Composite down 5.48% on news that the China Securities Regulatory Commission (CSRC) had put Citic, the country’s largest broker and Guosen Securities, a mid-sized broker, under investigation.

In FX, the US dollar was stronger across the board though for no apparent reason, DXY closing above 100 (100.02) for the first time since March (when the high was 100.33). The broader BBDXY added 0.36% with EM currencies also weaker (e.g. KRW -0.5% and MYR -0.9%).  ADXY was -0.32%, putting it within about 0.7% of its late September YTD lows. CNY was pushed up to 6.4475 Friday vs. the CNY onshore close of 6.3945. Today’s CNY fix will be interesting.

In G10, fresh weakness in oil and exchange traded metals (though not iron ore) meant that commodity currencies fared worse, led by NZD and CAD, both down 0.58% to 0.6533 and 1.3371 respectively. AUD -0.44%, to 0.7193 (and virtually unchanged thus far on Monday).  EUR/USD lost just 0.16% but at 1.0593 this was the lowest close since April (YTD low is 1.04936 on 13 April). GBP lost 0.44% despite Q3 GDP being unrevised at 0.5% Q/Q, though note was made of the 1.5 percentage point drag from net exports encompassing a 5.5% Q/Q surge in imports to the highest level since 2006 – seen related in part to the 18% appreciation in the GBP TWI in the past two years.

In bonds, US yields came under mild downward pressure despite flat equities and no economic news. In commodities, gold lost $14.88 to a fresh cycle low of $1057.45.  LMEX was -2.01% but still above Tuesday’s YTD lows, while iron ore added $0.52 to $44.50.  Heading into next Friday’s OPEC meeting, Brent crude lost another $0.60 to $44.86 and WTI -$1.33 to $41.77.

No US economic releases on Friday, though European Commission November confidence readings suggest no measurable hit to consumer or business confidence from the Paris terrorist attacks.

CoreLogic RPData’s weekend auction clearance stats. show a nationwide average of 60.1%, up a fraction from last week’s 59.5%.  Sydney’s preliminary clearance rate of 56.3% is a new low for the year after last week’s 56.7 (the previous low).  Melbourne cleared 65% of auctions up from 64.7% last weekend. 3,649 auctions took place nationwide, the second highest of the year.

Coming Up

It’s a week ahead chocked full of top-drawer risk events.

Globally, Thursday’s ECB meeting and Friday’s US payrolls report top the billing. Janet Yellen speaks to the Economics Club in Washington on Wednesday; the manufacturing and non-manufacturing ISMs are due on Tuesday and Thursday respectively. China PMIs (both Caixin and official versions) are due on Tuesday.

The IMF Board meets tonight to consider the renminbi’s admission into the SDR basked and where an affirmative decision seems assured. Assuming so, initial interest will be in which side of 10% the CNY’s initial weight falls. The bigger the weight, the bigger the potential negative knee jerk reaction in EUR, JPY and GBP (and possibly AUD) on the view they will all have to make way for a bigger role for CNY in global FX reserves.

Locally Q3 GDP on Wednesday (consensus 0.7%) is arguably more important than the RBA’s last meeting of the 2015 on Tuesday, insofar as Governor Stevens told an audience of economists last Tuesday night to ’chill out’ on the subject of rate changes at least until the Board re-convenes in February to consider the intervening data.

To kick of the week, today’s October private sector credit data are of interest, particularly after the September data showed strong growth in business lending (+1.2% m/m) but which evidently didn’t translate into better (non-mining) business investment during Q3 judging from last week’s capex data.  We also get Q3 corporate operating profits.

Offshore tonight, German CPI and US pending home sales are due.


On global stock markets, the S&P 500 was +0.10%. Bond markets saw US 10-years -1.40bp to 2.22%. On commodity markets, Brent crude oil -1.32% to $44.86, gold-1.3% to $1,056, iron ore +1.2% to $44.50. AUD is at 0.7196 and the range since Friday’s local close has been 0.7185 to 0.7219.

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