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Westpac Institutional Bank Morning Report 22.10.10

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Fuseworks Media
Westpac Institutional Bank Morning Report 22.10.10

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Sentiment rode high until late morning NY, when an abrupt reversal sent markets into the red for the day. The S&P500, which earlier made a 5 month fresh high, is currently down 0.5%. Much of the early gain was attributed to US corporate earnings which continued to positively surprise, EBay and McDonald's notable last night. Over 85% of S&P500 companies have so far beaten estimates. Financials (-1.4%) underperformed on concerns that banks will crystallise home loan losses in a fresh wave of foreclosures, as well as being forced to purchase their mortgage backed securities. Commodities turned in a similar manner to equities, the CRB index currently 1.2% lower. The larger falls were in oil (-2.9%) and silver (-3.1%). US 10yr treasury yields bucked the moves, adding 4bp to 2.552%. The Fed's Bullard said they would monitor data right up to the policy meeting on 3 November.

The US dollar firmed as equities fell (arguably it led), the index rising from 76.85 to 77.55. EUR extended early gains after strong German PMI data, but then followed the global theme and fell from 1.4050 to 1.3904. USD/JPY was confined to a narrow 81.00-81.35 range.

AUD peaked with US equities at 0.9892 and fell to 0.9743 over the following few hours.

NZD similarly fell from 0.7537 to 0.7435. AUD/NZD ground higher to 1.3140 before the global sell-off sent it back to 1.3100.

US Philadelphia Fed index edges up from -0.7 to 1.0 in Oct, the first positive reading in three months, though only just. The detail showed orders less weak on -5.0, shipments up slightly at 1.4, and jobs up a little to 2.4. This soft report contrast with the very strong NY Fed index for October released last week.

US initial jobless claims drop 23k to 452k last week. The prior week was revised up from 462k to 475k. The latest week coincides with the monthly non-farm payrolls survey, and find claims at the lower end of the recent range, consistent with modest private sector jobs growth continuing.

US leading index up 0.3% in Sep, its strongest rise in four months, but still way down on 1+% average monthly gains around the turn of the year.

Japan's all-industry index declined by 0.4% in August, but is 3.7% higher than a year ago. In August, activity in the government and construction sectors rose; however, this was more than offset by weaker activity in the manufacturing and tertiary sectors.

Euroland advance PMIs for October. The factory PMI rose from 53.7 to 54.31, but the services PMI slowed from 54.1 to 53.2, so the composite PMI eased from 54.1 to 53.4. Also the advance read on Oct consumer confidence for Euroland was steady at -11.

UK retail sales fall 0.2% in Sep. This followed a 0.7% fall in Aug and heightens concerns about economic activity losing momentum. Also in Sep, major bank mortgage approvals slowed from 45k to 44k, their lowest since April last year.

Canadian leading index down 0.1% in Sep, its first negative reading since April 2009. Outlook AUD/USD and NZD/USD outlook next 24 hours: Australian export and import prices released today should be minor but supportive for the AUD which is expected to be bound by 0.9660 and 0.9890. NZD may test major support at 0.7430.

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