December 12, 2017

Markets Today: She speeds

It’s been a night marked by a suicide bomb explosion in Times Square, an event that thankfully inflicted very contained damage to individuals and even less to market stability.

The NZD sits at the top of the FX leader board, while at the other end the Pound has been more volatile after last week’s trumpeting of a “deal” to proceed with further negotiations, principally over trade.  The Pound wobbled and gilts rallied.  Equity markets were uneven in Europe (FTSE rose) while US markets are in positive territory, Treasury yields somewhat higher as are base metals, oil, and coal.  Gold prices eased, as has the VIX.  The AUD/USD is trading at around 0.7530.

Oil prices have risen on news that the North Sea Forties Pipeline System – that carries 400kbpd of oil to Scotland – is being closed for repairs after the discovery of a crack, repairs apparently to take weeks rather than days.  Spot Brent futures rose 2% on the news, WTI also supported, up 1%.  The Rouble and the NOK are higher on the news.  Base metals were stronger too ahead of Chinese November growth numbers on Thursday, better than expected trade growth from Friday followed up by higher than expected New Yuan lending and Aggregate Financing data released last evening.  Iron ore was mixed yesterday after a positive Friday.

It might be something of an overstatement to say that the Kiwi has been speeding, but it’s certainly been a top performer among G10 FX league over the past 24 hours.  The flightless bird rallied immediately after the announcement yesterday afternoon that Adrian Orr is going to be the next Governor of the RBNZ.  He is currently the head of the NZ Super Fund and will return to the RBNZ having previously been Deputy Governor of the RBNZ.  He’s certainly well-credentialed but whether he proves to be hawkish or otherwise remains to be seen.  My colleagues from across the Tasman are not certain at all he’ll be a hawk.

The NZD jumped around 0.75% on the news of Orr’s appointment, extending those gains a little further overnight, although it remains within its recent 0.68-0.70 trading range.  AUD/NZD traded lower on the news, from around 1.0960, initially lower by a big figure, before steadying, currently trading just below 1.09.  NZ yields also edged higher.

It was a “bits and pieces” night for data, the Chinese lending data perhaps the more notable.  US JOLTs Job Openings for October revealed fewer openings than expected, but an increasing in the hiring rate.  The quit rate was steady, so no sign of increased labour turnover, often a wage inflation pick-up precursor.  The NY Fed Survey of Consumer Expectations did though reveal a rise in earnings expectations, from 2.1% to 2.6%, a rate that’s back to July’s level and tilted to those with less than a college education.

Coming up

Today is NAB Survey day, this one the November survey, coming on the heels of the October survey that revealed a record high for Business Conditions.  Again absolutely no clues ahead of 11.30!

Before the NAB Survey comes the ANZ-Roy Morgan weekly estimate of Consumer Confidence.  The previously weekly estimate of Consumer Confidence remained close to its average, this survey starting in 2010.  The monthly W-MI reading is out tomorrow.  That survey’s reading for November was a tad below its average.  Consumer confidence has lagged business confidence, but the divergence recently mostly reflects outperformance of business confidence.

The main release tonight is UK inflation.  The market is expecting CPI to remain steady at 3.0%, core inflation at 2.7%.  There is also the ZEW Investor Surveys for Germany and the Eurozone, not especially market sensitive.  There is US NFIB Small Business Optimism, surveyed with tax reform discussions in full flight and realistically getting closer.   US PPI is out tonight ahead of CPI tomorrow night while the FOMC start their two day meeting, the announcement 6am AEDT Thursday.

Be aware the Government’s mid-year Budget review is expected before Christmas, so due any day and often without much notice.  Employment has been good, positive for tax, though wages growth has remained soft.


On global stock markets, the S&P 500 was +0.23%. Bond markets saw US 10-years +0.72bp to 2.38%. In commodities, Brent crude oil +1.92% to $64.62, gold -0.2% to $1,243, iron ore +0.2% to $68.61, steam coal +0.5% to $98.05, met. coal +1.1% to $231.00. AUD is at 0.7531 and the range since yesterday 5pm Sydney time is 0.752 to 0.7545.

Good luck.

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