Stocks reverse losing streak, Aussie rallies

August 23, 2013

Recap

  • Interesting day I reckon. A suspension of trade on the Nasdaq as systems went awry but it was the lack of genuine follow through from the better than expected HSBC Chinese PMI (50.1 v 48.3 expected and 47.7 last) which was mitigated by weaker outcomes in in French and German Markit manufacturing PMI’s.  The total EU manufacturing PMI was however stronger than expected at 51.3.
  • In the end though stocks in the US were higher as pretty much everyone seemed to think they would be after a 6 day losing streak. The Dow was up 0.45%, the Nasdaq rose 1.09% and the S&P 500 rose 14 pts of 0.86% to 1657. European stocks were similarly ebullient with the FTSE up 0.88%, the Dax rose 1.36%, the CAC rose 1.09% while stocks in Milan and Madrid rose a pretty solid 2.56% and 1.99% respectively.
  • Rates traders weren’t so excited though with US 10’s a little lower than the highs in overnight Asian trade yesterday but still finishing at 2.89%, Bunds were higher though at 1.92% and Gilts are at 2.72%
  • On Global FX markets the Aussie recovered from yesterday’s low at 0.8930 to a high of 0.9042 and sits at 0.9006 this morning. The Aussie benefitted from the better than expected HSBC Chinese PMI which was clearly leaked again yesterday 15-30 minutes before the figure which is an appalling abuse of market structures and if Chinese authorities are not going to do anything about it then Markit and HSBC need to ensure the integrity of their figures.
  • In other pairs Euro (1.3355) is largely unchanged after recovering off a 1.3297 low. GBP (1.5585) is down 0.4% but also well off the lows and the Yen is under pressure with USDJPY up more than 1% to 98.73.
  • On Commodity markets Gold was up to $1372 a rise of almost $20 on the low yesterday, Nymex Crude was up 1.27% to $105.17, Dr Copper was back at $3.33 lb and our friends the Ags were at it again with Corn down 1.91%, Wheat fell 1.37% and Soybeans were 0.83% lower.
  • Other data released last night showed Initial Jobless claims in the US rose from last week’s 4 year low of 323,000 to 336,000 and the US Markit manufacturing PMI was 0.1 higher at 53.9.

On the data front a fairly quiet slide into home plate this week with FDI in China, GDP in Germany, again, GDP in the UK and New Home Sales in the US.

Time for HSBC and Markit to ensure the integrity of data releases

This is my personal view and in no way reflects what VantageFX might or might not think but I am starting to get sick of the apparent leaking, yes it is only apparent but smoke, fire and all that, of the Chinese data in the half hour or so before data is released and I believe that if the Chinese authorities are not going to do anything about this blight on markets then I would call on HSBC and Markit who have their names on the seemingly most important of Chinese data releases need to act jointly to ensure the integrity of the data.

When I was at Westpac and NAB we had very important data releases relating to surveys that both organisations conducted but they never, never ever leaked into the dealing room or the market pre-release. The integrity was guarded by Bill and Alan like the proverbial Pit Bull. Indeed to this day I don’t even know if these great Chief Economists actually know the results pre-release even though I have always assumed they do.

Yesterday, as with the Chinese releases after Australian Labour force data recently, the price action in the Australian dollar and other markets changed materially in the 15 to 30 minutes before the release of the data. The Aussie went from being under selling pressure to being bid. On employment day recently the very poor data saw selling result but the selling hit a floor and hit it hard and then of course the Chinese data came out and the Aussie and other markets fairly roared.

This is not just the view of one grumpy trader who was short Aussie dollars because I was only small short and have taken the rally as an opportunity to go very short once more. But for the sake of market integrity HSBC and Markit must act to ensure that at the very least it is only traders punting on better data that is driving pre-releases not a leak of data which is what old timers like me and the Twitterverse are very suspicious off.

Rant over, Aussie dollar still biased lower

I reduced my shorts from 5 or 6 units to 2 units by yesterday morning and I was seriously considering squaring up into the HSBC PMI when my TwitterFeed started going a bit psycho about the data being leaked. But I am core short and in a bear market I’m bearish so I left the positions on.

So I’m under water at the moment in both accounts but not worried because the Aussie’s rally has clearly been met with some serious selling as the reaction in FX markets has been to recognise that a shift is on and that a knee jerk Aussie rally in the face of Emerging Market ructions and a struggling Australian economy would be a very optimisitic long.

As I tweeted yesterday even though I was short Aussie I was minded of what happened after the last ramp in the Aussie – which was a rally and then a huge sell off. It is as though the half life of Australian Dollar positivity is getting shorter.

The view is still that the Aussie is headed back to the 0.8830-60 region and then we’ll see.

Good hunting and have a great day and weekend

Greg

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