Interesting last 24 hours in markets with the S&P hitting 1525 for the first time since 2007 but reversing to sit lower at present. Euro was stronger initially after comments from the Russian Finance Minister which supported the G7 comments yesterday but it lost ground and Gold is settling at its lowest close since August last year.
The G7 statement from yesterday is also still reverberating around markets with the statement which reeked of do as we say not as we do was then sought to be modified by the usual “unnamed officials” saying it was about the Yen confusing markets and keeping them wary as we approach the G20 meeting. Indeed the statement by the Russian Deputy Finance Minister that “there are no signs” Japan’s monetary authorities were intervening were a green light to sell yen once again but more cautiously than has been the case recently.
We can expect more confusing statements this week with the G20 meeting on but as we noted yesterday the chance for a coherent response or words that address the current currency wars will be lacking. Indeed as James MackIntosh wrote in the FT yesterday the real currency war that matters is the one that is getting the least amount of attention and which we mentioned yesterday which is the value of the Chinese Renmimbi and the petrodollar block. As he wrote,
The global imbalances in consumption and investment this creates is the currency war which really matters – and which the world is doing far too little to address.
I never had much sympathy when Greenspan effective blamed the trade surplus nations and the recycling of their surpluses into Western financial assets for the GFC but to an extent he is right. Imagine if the Renmimbi was 5, 4 or 3 it would be a very different world.
But back to overnight news and we saw that the retail sales in the US were up 0.1% as expected, Eurozone wide industrial production was up 0.7% which was much stronger than expected but it left the year on year rate still down 2.4%. But it is clearly a surprisingly good result.
Initially this data and the Russian comments gave the Euro a bid tone and it rallied to a high of 1.3460 before pulling back a little to sit at 1.3443 down 0.07% on the day. The range was fairly tight at less than 50 points and perhaps this is what we have ahead of us over the next couple of days. The Aussie likewise was fairly quite trading a 1.0303-1.0361 range and sits at 1.0448 this morning up around 0.4%.
As you can see in the 1 hour chart above the Aussie is stalling below a little trend line that goes back to the highs around Australia Day and comes in today at 1.0365. Without any decent data out in Australia today a catalyst for a break might be lacking however and the last 24 hours range is likely to contain the next 24 hours range as well.
The Yen is not much changed either up just 0.06% against the US dollar but GBP remains under pressure as the Bank of England signalled that even though it sees a potential inflations issue down the track it will not be raising interest rates rather it may use further monetary stimulus to help the weak British economy.
We have been on this weakening GBP story for a while now and at 1.5535 it is at its lowest since last August and almost 150 points off the high of the day. No wonder that Mervyn King supports letting domestic monetary policy run its course and take its impact on the exchange rate of a nation’s currency as he reiterated in a speech at the Economic club overnight.
On the stock markets the State of the Union speech by President Obama gave the US market a bid tone early along with the retail sales data but as the day has proceeded that has evaporated and the S&P after making a high of 1525 now sits down 2 points at 1517 with 45 minutes to go before the close. The Down is off 0.45% or 63 points but the Nasdaq is up 0.08%.
The technical resistance in the S&P 500 is evident in the chart above and this trend line remains a constraint on further gains for the moment.
In Europe it was a better night after the industrial production numbers and they largely missed the reversal in the US with the FTSE up 0.33%, the DAX up 0.68% and the CAC up 0.34%. Milan and Madrid were also stronger rising 0.41% and 0.87% respectively.
On Commodity markets we continue to watch the gold price as it remains in a multi-month down trend. Gold is down 0.45% at $1641 and looks biased lower as you can see in the chart below. Silver was off 0.48% roughly in line with gold’s fall for a change.
Elsewhere Nymex crude fell 0.51% even though the EIA stocks data rose only a quarter of what was expected. The Ags were quiet and OJ was up another 1.29%.
German GDP and related Eurozone and other European nation GDP figures tonight are going to be the huge number for the next 24 hours along with the usual release of Jobless claims in the US.