Sentiment Holds Firm
Risk appetite recovered in earnest overnight as investors shrugged off some initial fears about downgrades in Europe and lack of progress in the fiscal cliff talks in the US. Australian GDP came in broadly in line with expectations for Q3 at 3.1%y/y, though our economists note that capex growth was reasonably soft. In Japan, BoJ Deputy Governor Nishimura noted that ‘powerful easing’ would continue, though USDJPY for now seems to have reached a ‘policy limit’ as elections loom. A strong recovery in Chinese equity markets also helped with sentiment, giving markets more confidence in the cyclical rebound story. Ahead today, services PMI will be out across the Eurozone but markets will also have an eye on US labour data, with the ADP a possible precursor to the upcoming payrolls release (UBSe. 50k, cons. 95k). Non-manufacturing ISM is also out, and the RBNZ decision is due late during the US session. Overnight EURUSD traded 1.3092-1.3024 and USDJPY 81.80-82.34.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank