News and markets
Hong Kong and India on holiday today.
The votes are being counted in the Mexican presidential and congressional elections held yesterday. There seems little doubt about the presidential result, all the exit polls point to a victory by a good margin for Pena Nieto of the opposition PRI party who has been the governor of the State of Mexico for 6 years.
Also from Mexico, some peso-bullish MnA news in the brewing sector was confirmed on Saturday: http://www.reuters.com/article/2012/06/29/us-modelo-abinbev-idUSBRE85S0B420120629?feedType=RSS&feedName=topNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FtopNews+(News+%2F+US+%2F+Top+News)
Early selling has pushed USDMXN lower this morning, from a NY close at 13.36 we have gone down to 13.26 in early Asian hours.
As expected, the German parliament has approved the ESM on Friday. However the law still has to be signed off by the President and Germany’s highest court has asked him to hold off signing until they complete a legal review of the law.
David Cameron would consider a UK referendum on how much power the EU has over UK laws. However the vote won’t be soon and it won’t be on whether to leave the EU so the market impact has been zero so far. After the huge risk on moves on Friday, This week has started quietly in part due to the holiday in HK. EUR started in Sydney strong but has given back a little of the Friday gains in Asia time: from a high of 1.2681 in Sydney time we are lower to 1.2625 now. The other currencies have followed in suit, AUD is off the high of 1.0270 down to 1.0220, Cable is down 50 pips to 1.5660. JPY had another attempt on 80.00 this morning but just like NY we have failed to breach the figure and take out the rumoured option barriers. Spot back to 79.60 now.
USDAXJ NDFs had a good move lower in NY time Friday but have bounced a little this morning, but not as far as Friday’s Asia close. 1m KRW NDF has bounced from 1142 to 1145. 1m INR NDF had the biggest move of all on Friday, (that was clearly where positions were the most crowded). The Friday move was a thumping 2.8% down to 55.55, we’ve bounced to 56.00 now in illiquid markets (Mumbai is out today).
Stocks in Asia are all in the green after a strong SnP performance on Friday. The SnP futures tried for higher early on but stopped at 1360 and are now back to 1355 which is very close to the NY close.
Commodities has a strong bounce on Friday in line with the other asset classes and have retreated slightly from the highs this morning.
Data is mixed today: A strong Tankan but weak PMI numbers from Asia.
Japan’s Tankan survey : the numbers were better than expected, particularly in the large manufacturing companies section.
Korean CPI came out at -0.1% mom, 2.2% yoy, lower than expected. Trade data was out yesterday, exports were up and imports were down leading to a larger than expected trade surplus of 5bn USD.
Yesterday the official China manuf PMI came out at 50.2, slightly lower than May but a bit above the expectations.
Today we have seen the HSBC PMI numbers, China was down a touch on last month at 48.2, Taiwan was lower at 49.2 and Korea was also lower at 49.4, Indonesia however was higher at 50.2.
FX option vols
Vols were sold off on Friday with the spot moving sharply in the risk-on direction. Today vols are again softer.
Customer business very slow with HK on holiday but some business being done in the brokers.
AUD 1m vol initially opened a touch higher for the weekend count but has gone down since and has been trading at 10.4 just now. It’s a similar story in the other majors. JPY 1m has been given at 8.15 but comes back bid there. EUR 1m started at 10.2 middle but is now down to 10.0 mid. The 1m RR in EUR has been pushed a lot lower yesterday from 1.45 and now stands at 1.0 middle which is the lowest in about 3 months.
KRW vols have come off in parallel (the curve was already very steep before and is unable to steepen further on the quiet days). All periods are down 0.4 vols and the 3month has seen several hundred trade at 9.0 today. Also of note the 8day 1143 has traded in 200, someone buying the lot at 6.3 which is cheap compared to last week’s levels.
CNY vols have bounced modestly off the lows from last week. 1y is 2.6 middle from a low print of 2.45, the 1y RR is trading today at 1.1 from 0.9 the recent low.
NATIXIS