The risk rebound that started overnight extended in the early part of Asian trading as markets reacted to news that China’s National Social Security Fund (NSSF) plans to invest Yuan 10 bln (USD1.58 bln) in local stocks. A similar move had also been announced by Taiwan and this led to a broader up-move in Asian bourses lifting related risk currencies as well, with the EURUSD easily tripping early stops above 1.31.
In other news, Japan’s merchandise trade balance deteriorated more than feared in November, with the deficit widening to ¥684.7 bln from ¥280.2 bln in October with exports shrinking 4.5 percent y/y (4.3 percent expected), the largest fall since May, and imports rose 11.4 percent partly due to higher fuel costs. It was notable that exports to Asia were weak, falling 8 percent on-year with exports to China down a hefty 7.9 percent y/y amid growing signs that the EU crisis is slowly having its impact on the region.
There was very little Christmas cheer in the UK’s GfK consumer confidence survey which slipped back to its lowest level in three years in December. The outlook component of the survey was very weak, falling 8 points on the month to -41 and dragging the broader index down to -33 from -31 last. GBP however remained supported on the broader positive risk appetite.
The Bank of Japan kept rates unchanged, as had been widely expected, but downgraded its assessment of the economy saying that the pickup was “pausing” and that the economy was likely to stall for the time-being.
Europe’s single currency kicked off its mild rebound overnight as Spain completed a successful auction (sold more than its target and at a lower yield), EU data erred on the positive side and banks tapped the European Central Bank’s 3-year LTRO facility. The risk rally extended to other currencies with GBP performing well despite warnings from the Bank of England’s Bean that it stood ready to inject further Quantitative Easing measures in February if needed. AUD recovered the 1.00 handle as oil prices rebounded and firmer stocks helped the broader risk-on trade. Rumours also circulated of an additional Chinese rate easing while Sweden’s Riksbank did cut rates by 25bp in a widely expected move. The only negative news impacting the risk rally was the International Monetary Fund’s warning that Portugal’s reform progress faces risks from rising tensions in Europe while Fitch placed a number of Italian and Spanish banks on credit-watch negative.
US housing data overnight was strong with November housing starts putting in a healthy 9.3 percent m/m increase (a mere +1.1 percent expected) and building permits were just as encouraging with a 5.7 percent m/m increase (1.4 percent decrease expected). Wall St posted strong gains, taking the lead from Europe and positive US data with the DJIA rallying 2.87 percent, S&P +2.98 percent and the Nasdaq +3.19 percent. However, Oracle reported poor earnings results after the bell.
Data Highlights
* CA Nov. CPI out at +0.1% m/m, +2.9% y/y, both as expected vs. 0.2%/2.9% prior resp.
* CA Nov. Core CPI out at +0.1% m/m, +2.1% y/y vs. 0.1%/2.9% expected and 0.3%/2.1% prior resp.
* US Nov. Housing Starts out at +9.3% m/m vs. 1.1% expected and revised -2.9% prior
* US Nov. Building Permits out at +5.7% m/m vs. -1.4% expected and revised +9.3% prior
* NZ Q3 Current Acct. Balance out at –NZ$4.599b vs. –NZ$3.75b expected and revised –NZ$0.844b prior
* AU Oct. Westpac Leading Index out at +0.1% m/m vs. revised -0.5% prior
* JP Nov. Merch. Trade Balance out at -¥684.7b vs. -¥484.7b expected and revised -¥280.2b prior
* JP Nov. Trade Exports out at -4.5% y/y vs. -4.3% expected and -3.8% prior
* JP Nov. Trade Imports out at +11.4% y/y vs. 8.3% expected and 17.9% prior
* UK Dec. GfK Consumer Confidence out at -33 vs. -32 expected and -31 prior
* NZ Nov. Credit Card Spending out at -3.4% m/m, +3.2% y/y vs. 2.6%/7.8% prior resp.
* JP BOJ leaves key rates unchanged, downgrades economic assessment
Upcoming Economic Calendar Highlights (All Times GMT)
* GE Import Price Index (0700)
* Swiss M3 Money Supply (0800)
* Sweden Confidence Indicators (0800)
* Norway Unemployment (0900)
* UK BOE Minutes (0930)
* UK Public Finances (0930)
* US MBA Mortgage Applications (1200)
* CA Retail Sales (1330)
* CA Teranet/National Bank House Price Index (1400)
* US Existing Home Sales (1500)
Andrew Robinson
SAXO BANK