Vantage FX | Japan heads over its own cliff – AUD strong | 13th November 2012

Thinish holiday trade left markets to their own devices last night but they lacked the catalyst for any material moves. Certainly Asia had an interesting session after the weak Japanese GDP data was released but balancing this was the better Chinese data from the weekend but new lending data released which showed that new loans fell 14% from a year ago was a concern.

The big news overnight after the settlement between Apple and HTC was that Samsung hit Apple with a 20% price rise on its processors which knocked Apple shares a little but otherwise it really was a fairly quiet night’s trade with enduring concerns about Greece and a report that the embattled country will need an extra €15 billion by 2014.

The Japanese data out yesterday was appalling. Appalling because of the future it shows Europe. Appalling because of the futures it possibly also shows other developed nations and appalling because of the toll that this 2 decades of moribund will have and is taking on Japanese society. GDP for Q3 came in at -0.9% which annulaised to -3.5% which is the worse outcome since the Earthquake and Tsunami. Exports were down 5% and capital expenditure fell 3.2%. In other data Machine Tool orders fell at a -6.7% year on year clip from -2.8% last.

Stocks

At the close of play European stocks were largely unchanged mixed with the FTSE off 0.04%, the DAX up 0.07% while the CAC continues to be the volatile one of the three big European markets falling 0.35%. madrid came under pressure again falling 0.87%.

On Spain I know that conventional wisdom is that Spain will have to ask for a bail out eventually but for mine it seems that the problem with or reason why Spanish PM Rajoy is dragging his feet were writ large by his decision to forestall foreclosures over the weekend after the suicide of an evictee. When or if Rajoy asks for help he will most likely lose the ability to institute such simple but important reactions to the impact of his austerity – he can see how Greece is going and has gone with the ceding of a lot of its fiscal sovereignty – why exactly would he need to tread that path if he can muddle through?

In the US it is Veterans day but the Stock market is open and in fairly quiet trade the S&P 500 is up 0.10% to 1381, the Dow is up 0.10% and the NASDAQ up 0.06% at 7.01 59 minutes before the close.

Japanese stocks as measure by the Nikkei were 0.93% lower yesterday after the weak GDP data and the ASX All Ords was also lower down 0.28%, the Kospi in Korea fell 0.19% and in Singapore the Straits Times fell 0.07%. Shanghai preferred to focus on the Chinese data over the weekend and lifted 0.49%.

FX Markets

Tight ranges overnight in Global FX markets. The Euro sits at 1.2709 this morning after trading in a 1.2695-1.2739 range over the past 24 hours and is roughly unchanged on that time frame. GBP on the other hand is starting to look very weak – granted it hasn’t yet broken the important 200 day moving average at 1.5845 but it is not too far off at the moment sitting at 1.5872.

GBPUSD

The Aussie dollar remains as strong as an Ox and had another good day if you are a bull. Whereas most other currencies are unchanged or weaker against the US dollar the Aussie is up 0.38% to 1.0424 after a high on the 61.8% retacement level of the September October selloff. The big news for those who like to play them continues to be the Aussie on the crosses – our cross report will be up later – but EURAUD and GBPAUD are both in strong downtrends.

Commodities

Interesting story this morning that the US is going to become the world’s biggest oil producer for about 15-20 years from 2017 due to the unlocking of the shale oil and gas according to the International Energy Agency. Certainly an interesting prediction if it comes true with massive geo-political implications.

Overnight Nymex crude was a little lower off 0.26% to $85.85 Bbl. Gold was 0.18% higher at $1733 oz and Silver outpaced the yellow metal once again rising 1.11% to $32.66 oz. The Ags got smashed after the announcement on Friday of a bigger harvest saw prices trade through range bottoms and the technical selling has accelerated the move lower. Soybeans was down 2.41% and is almost at the target we set on the break Friday, Wheat fell 3.19% and Corn was off 2.81%. The chart below is Soybeans but there could be a trade on Corn and or Wheat as they have yet not broken down through their range bottom.

Datawise In New Zealand we get the Food price Index this morning before UK RICS house prices and the NAB Business survey (the only economic data you really need to know for Australia I reckon). Japan has industrial production and capacity utilization to follow up on yesterday’s GDP data and then tonight we have a raft of price data in the UK and Europe along with the German ZEW survey of economic sentiment. Some minor data in the US such as the NFIB business optimism index and Redbook index.

Thoughts, comments, queries together with frank and fearless feedback all welcome. I’m happy to answer questions or comments on the comment stream wherever I can. 

I’m also on Twitter @gregorymckenna

NB: Please note all references to rates above are approximate and should not be used for trade reference.