Vantage FX | Stocks up, USD Stronger, Aussie can’t break range top | 6th December 2012

December 6, 2012

Stocks are up in the past 24 hours from Asia, across Europe and into the US. Positive comments from Chinese Communist Party Leader Xi Jinping about growth and the report from the Chinese Academy of Social Sciences that growth will accelerate from 7.7% to 8.2% in 2013.

Equally supportive of US markets in particular for mine was the news on Bloomberg that up to 40 Republicans had signed a letter in support of President Obama’s side of the Fiscal Cliff negotiations. Certainly the negotiations are continuing and there are many twists and turns to come but President Obama did say overnight that negotiations are open but a deal could be done as soon as a week.

We’ll see but a deal will no doubt be positive for stocks if or when it comes.

On the data front its was services PMI day and there was more good news to follow on from the manufacturing PMI earlier in the week.

As you can see in the table above the data was mostly improved from the month before but equally in Europe Services and composite PMI’s remain below 50. Of note and very positive is the strong move higher in the JP Morgan Services and Composite PMI’s which posted solid gains.

Also out on the data front was a raft of data in the US – the ADP employment survey was weaker than expected with gains in November of 118k versus expectations of 125k and down from 157k last month. Hurricane Sandy’s hands are in this and in the non-farm payrolls number Friday is my guess. Non-farm productivity was out as well and it rose 2.9% in Q3 from 2.7% expected and 1.9% last. Unit labour costs fell 1.9% while factory orders rose 0.8%.

Stocks

At the close European stock markets with the exception of Madrid were higher. Spain was under a little pressure because it failed to sell all the bonds it wanted to at auction overnight even though, or perhaps because, the yield fell from the last issue. The FTSE ended the day up 0.39%, the DAX was 0.26% higher and the CAC was up 28%.

In the US with 40 minutes before the close the S&P 500 is up 7.3 points or 0.52% to 1414 – its been running on the spot for a while now hasn’t it. The Dow is up 0.94% to 13074 for a rally of 122 points while the NASDAQ is down 0.33%.

Helping explain the difference in the index is the rally in Financials after Citbank announced 11,000 job cuts which dragged it and BoA higher. However Apple was under pressure again overnight which pressured the markets before the optimism over the cliff emerged. Apple’s bounce has recently failed at the 200 day moving average recently and the focus turned negative . Sentiment has certainly changed for Apple since the high and big sell off and technically it looks like it has further downside.

In Asia Shanghai and Hong Kong roared higher yesterday no doubt helped by the idea that growth can accelerate in 2013 but newswires were quoting themselves and traders saying it was simply about the market being cheap. It has been for a while now but it kept falling so maybe this is just groping around ex-poste. At the close though Shanghai was up 2.87% with the Hang Seng 2.16% higher.

Elsewhere in Asia it was positive with the Nikkei up 0.39%, the ASX up 0.36%, KOSPI up 0.61% and the Straits times 0.45% higher.

FX Markets

The US dollar retook some lost ground overnight and while the Euro is only down 0.11% at 1.3079 it is well below the high of the day at 1.3126. USDJPY is up sharply to 82.37 for a rise of 0.61% on the day. Is it a turn for the USD? Has it found a base? Too early to tell just yet but it bears watching particulalry if you have been using the recent USDJPY high as a short level.

Looking at the technicals for the Euro the 4 hours are suggesting a move back toward 1.2970 if 1.3060 breaks with resistance at last nights high.

In the UK the Autumn Fiscal Statement saw a downgrade of growth and a lengthening of the period of time before the Government debt position starts to be materially reined in. The UK is doing it tough at the moment and the Triple A rating must be being looked at by the ratings agencies at some point – not that currency markets necessarily worry about that but it it did lose its AAA at some point heaven help Australian business as it would simply point more buying and more reserves the Aussie Dollars way. GBP is largely unchanged on the day at 1.6099.

Speaking of the Aussie it still can’t get the impetus to push through the range top around 1.0489 making a high in the past 24 hours of 1.0484 but its sits currently at 1.0462 down 0.08% on the day. Yesterday’s GDP wasn’t terrible by international standards with a 3.1% annual growth rate and while the trend remains a slowing one everything in FX markets is about relativities so Australia and the AUD still looks relatively good.

On the charts however as you can see above AUD still can’t push through the top of the box and although it recovered from the overnight lows once the stock market began to rally – it’s a 1.0440/1.0490 range for the moment.

Commodities

Gold was a little lower again overnight falling to $1693  while Silver was 0.46% higher to $32.84 oz. The Ags were all higher with Soybeans up 1.55%, Corn was 0.87% higher and wheat rose 0.39%.

Crude was off a little down 0.69% to $87.89 bbl which isn’t too bad a performance given that it had a $1.50 range on the night after being pressured by growth in Gasoline stocks and the downward impact this had on prices for that commodity. Helping Crude no doubt though was that stocks fell much more than had been expected last week.

Datawise In Australia unemployment is the big number with the market expecting a flat number which we are unlikely to see given the volatility and the standard deviation of this outturn so there might be an opportunity to trade after. In NZD before that though we have the RBNZ’s MPS and also a speech from RBA Assistant Governor DeBelle. Tonight in Europe we have the EU GDP , German Factory orders and an ECB and BoE rate decisions. In the US jobless claims is the main focus tonight.

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

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

Catch me on Twitter @gregorymckenna or @FX_Global

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