Good morning. Equity markets were mixed on Tuesday, with the major indices experiencing heightened volatility. Opening weaker, traders shifted from currencies and treasuries to equities late in the session. On the economic front, Housing Starts and Building Permits fell short of initial estimates with 523,000 for HS recorded. Building Permits were forecast to reach 590,000 for the April period. The figure was however significantly lower with 551,000 recorded. Across the atlantic, EU officials commented on the Greek debt situation, with Jean Claude Juncker noting the importance of economic stabilisation in the region. He did not rule out the potential for debt refinancing as Greece continues to struggle with the current austerity package. The market is eagerly watching the situation in Portugal and speculating over the economic impact the crisis is having on the small country.
On the equity market front, the S&P500 finished the session flat at 1329. Computer and Technology manufacturer Dell posted a significant rise in profits for the period, with the company recorded a net income of $945 million. This translated into a 134% rise in income. In other corporate news, HP posted a slight increase in profits for the period. The report however fell short of initial forecasts, pushing the stock 7% lower.
On the currency front, the Japanese Yen weakened against the greenback with markets factoring in a possible easing of monetary policy. Citing extended economic pressure from natural disasters and sluggish growth, the Bank of Japan was confident that long term deflation could be alleviated. This had the reverse effect on the pair, with traders moving out of the low yield currency and shifting into the riskier assets. Markets also eyed the potential for further debt worries in Europe and the impact this would have on the yen. The USDJPY traded at 81.36. Aussie dollar consolidated on Tuesday, with the currency reacting to further speculation over interest rates in Australia. The RBA have recently been analysing the housing and retail sales data, with the market cautious over the short term impact of a drop in property prices. Noosa, the Sunshine and Gold Coasts in Queensland have begun to show signs of weakness in the sector, with a significant contraction in housing prices. This could translate into a fall in the currency. The AUDUSD traded at 1.06225. Strong surge in the Euro on Tuesday, with interest rate speculation driving gains. The announcement that British inflation rose during the period, translated into a cross regional currency push. Economists expect a similar scenario in the Euro zone. Debt concerns were eased during the session, as Greece reaffirmed that they would be able to cover their short term debt obligations. Traders continue to be sceptical. The EURUSD traded late in the day at 1.4234.