The safe arrival overnight of the third in line to the British throne can only add to the prevailing northern summer market malaise.
Certainty there has been little by way of data or events to force significant market activity and price action.
Of some note overnight is that US stocks have managed to eke out small gains (S&P500 +0.2%) despite a pre-open earnings and revenue miss from McDonald’s, who also warned of challenging global market conditions ahead.
Data also came in shy of expectations, notably existing home sales which fell by 1.2% against an expected gain of 1.5%. This though may have been another example of Alice in Wonderland economics, where ‘bad news is good news (for stocks) in so far as it plays into the debate about the timing of Fed tapering. US bond yields are little changed, 10s flat at 2.48%.
In fact, the detail of the home sales report was better than the headline, with the headline fall a function of a drop-off in ‘distress’ sales (from 18% to 15%) with ‘non-distress’ housing transactions rising for the fourth month in a row. Median prices for single family homes are 13.2% up on a year ago, though this is down from 15.8% in May.
Positive political news of our Portugal over the weekend – where the President decided against a potentially destabilising snap election, was followed by a call for unity from the Portuguese PM Coelho on Monday and a stated determination to keep the EUR78bn bailout programme on track. The result was a 42bp drop in 10 year yields with some positive contagion impact on Spain (-7bps) and Italy (-9.5bps).
In currencies, USD softness is the name of the gain, with USD/JPY still suffering a ‘sell the news’ response to Japan’s Upper House elections, EUR/USD supported by the aforementioned euro-peripheral spread compression, GBP/USD higher on stop loss buying above 1.53, and the USD in general suffering a little from the headline weakness in the home sales data.
This has all conspired to leave the AUD/USD as the second best performing G10 currency of the past 24 hours, despite the fact that money market pricing for an August RBA rate cut improved to 70% from 63% over the course of yesterday’s local session. Yet not completely unrelated to the AUD rally, gold had its best day since mid-September 2012, jumping $40 or 3% to $1336 (silver has posted an even more impressive 5% gain).
Coming Up
There is nothing of great note on Tuesday’s calendar, either locally or overseas that is likely to trouble the market scorers, save for some interest in the FHFA’s May vintage of US house prices and the Richmond Fed manufacturing index. French business confidence, Eurozone July consumer confidence and UK BBA mortgage lending figures and Canadian retail sales make up the running.
This leaves us watching and waiting for Wednesday’s Q2 CPI data and the Markit/HSBC ‘flash’ China manufacturing PMI, both on Wednesday, as the next major influences on local rates and FX markets.
NAB