رد: امجدونا للتوصيات السوبر ملكية
Obama or Romney?
Headlines: a busy week for US and Chinese economic data (GDP on Thursday) as well as the second US Presidential TV debate on Tuesday (the election is 6th November). There are also Q3 earnings releases out of the US to digest with more to come next week. The EU Summit is on Thursday and there is speculation that the Greek government will conclude budget negotiations with the “Troika” but whether Spain will make a formal request for a sovereign bailout remains unclear.
Recap last week: Positives-US initial jobless claims dropped by 30,000 but the BLS says the decline was mostly due to ONE state not reporting quarterly claims (so look for a bounce-back in this week’s data). US consumer sentiment jumped to 83.1 in October from 78.3 to its highest level since 2007 led by improving “expectations”. US PPI was flat in September. Eurozone IP up 0.6% in August. India IP up 2.7% y/y (better-than-expected). EU may push back Basel III deadlines (giving banks more breathing space in terms of raising capital). Bernanke says Fed QE benefits offset lower USD impact on EM economies…note: next FOMC meeting is 23rd-24th October.
Negatives: The IMF revised down its global GDP growth forecasts for 2012 and 2013 and questions the merits of continuing tight fiscal policies. US trade deficit increased in August to $44.2bn from $42.5bn, exports fell second consecutive month, the monthly deficit with China broadly steady at $28.7bn. US JOLTS job openings decreased in August to 3.561m from 3.593m. Chinese loan growth September at CNY623bn compared to CNY703.9bn in August. S&P downgrades Spain to BBB-. Greek unemployment rate reaches record 25.1%. Santander ‘pulls plug’ on $1.65bn purchase of RBS, Virgin Money said to be planning a bid. ZAR/USD at lowest level in 3 years over turmoil in mining sector and S&P sovereign downgrade last Friday.
Markets: Global stock markets were hit by their worst weekly losses in 4 months. The FTSE All World Index dropped 2.0% in the week. The S&P500 index fell 2.2% despite better economic data and strong earnings growth from JPM and Wells Fargo (US financial stocks up 21.4% ytd) but Alcoa ‘kicked off’ the Q3 earnings season by cutting its forecast for global aluminium demand by 1% point. The NASDAQ lost 2.9% with Apple down 3.5%. The Nikkei fell 3.7% but the Shanghai Composite was up 0.9% on the back of PBoC liquidity injections. The EUR dipped 0.7% against the USD as negotiations with Greece and Spain continue. The RMB/USD hit a 19-year high as PBoC said that it has “dramatically reduced” its FX interventions (some commentators see this as a ploy to help Obama and defuse anti-protectionist sentiment…a stronger RMB also helps blunt imported price inflation). The US Treasury-10 year yield fell 8 bps to 1.65%. Brent rose $2.79 to $114.81/bbl after IEA report highlights tightness in the oil market, Iran oil production at 23-year low.
Interest rates: Last week saw interest rate decisions by 6 central banks…2 banks cut rates (Brazil by 25 bps to 7.25% and Korea by 25 bps to 2.75%)….3 kept rates on hold (Indonesia at 5.75%, Peru at 4.25%, and Singapore which targets FX kept policy unchanged). Serbia raised rates 25 bps to 10.75%. This week there are interest rate decisions by Sri Lanka (7.75%), Thailand (3.0%) and Turkey (5.75%).
Over the weekend: German FinMin says he does not believe Greece will default and exit the EUR. Chinese exports grow faster-than-expected in latest trade data but may just reflect seasonal factors…exports are up 9.9% y/y. EU sources told Reuters this weekend there are plans for Greece to buy back its own debt. There is a recognition that, due to collapsing GDP, more needs to be done. Another plan is to transfer ECB bond holdings to the ESM and for the ECB to increase ELA assistance to Greece - something they currently refuse to do. The ECB have a BIG problem; they insist they will be ‘pari pasu’ in Spain but must remain senior in Greece. Sweden's Borg says Greece may have to leave the EUR in the next 6 months. Chinese M2 money supply rose 14.8% y/y in September compared to 13.5% in the previous month…PBoC injected a record net CNY365bn into money markets in the last week of September. China’s FX reserves stood at $3.29 trillion at the end of September. WSJ claims that Greek government will reach a deal with the “Troika” at European Summit this Thursday. US Earnings Q3-Monday-Citi, Tuesday-State Street, GS, Coca-Cola, Intel, IBM Wednesday-BoA/Merrill Lynch, BoNY, Pepsico, Halliburton, eBay. Thursday-Verizon, MS, Travelers, Microsoft, Google. Friday-GE, McDonalds, Honeywell.
Market comment: Friday is the twenty-fith anniversary of the 1987 stock market crash. Although this September was marked by stimulative action by the major central banks ( the ECB’s OMT’s, the Fed’s QEIII, BoJ balance sheet expansion of JPY10 trillion and record PBoC liquidity injections), October has so far proved to be a disappointment in terms of the reaction of equity markets. We do not expect a crash during the rest of this October as real money equity investors are currently defensive and at best neutral relative to their benchmark in front of the US Presidential election and the year-end “fiscal cliff”. If anything, real money investors are vulnerable to a “short squeeze” at some stage but this is unlikely to happen until the US election result is known and also greater clarity (if that’s possible!) in resolving the Eurozone crisis.
EUR/USD ($1.2889-$1.2960) edged lower in Asia, taking out stops around $1.2920, following negative weekend comments out of Europe and remains under pressure at the start of the European session as the market continues to weigh up uncertainty over a Spanish bailout application and Grexit. The EU summit is due this Thursday (18th -19th) but most are expecting Spain to wait until after elections on October 21st to apply for funding, especially given that PM Rajoy is still uncertain of the terms. An announcement would trigger the EZ bond buying programme and likely send the EUR higher on a relief rally but the market isn’t willing to push topside levels at this stage, leaving last week’s $1.2990 intact for now. Instead downside tests are likely to be seen in the interim with support led bounces likely to be capped to $1.2940.
EUR/JPY (101.01-101.65) trades in line with EUR/USD this morning after mirroring its moves overnight. The cross currently sits at 101.35 but should test support at 101.00 in the absence of any real EUR demand. That said JPY intervention concern should maintain some support on dips, which helped USD/JPY (78.30-78.60) trade cautiously higher in Asian from 78.30 to 78.60 overnight, the other factor being broad demand for the buck following Friday’s better-than-expected Michigan confidence data. Sellers continue to cap however and a test of 79.00 looks unlikely in the short term given the weight of interested sellers. EUR/GBP (0.8037-0.8063) is holding up in early European trade, more on the back of small EUR/USD buying than cross demand at this stage but despite downside still being expected, the risk of a Spanish bailout should contain given that a EUR relief rally should follow. 0.8025 bids remain in place with offers sitting at 0.8090.
GBP/USD ($1.6022-$1.6081) mirrored EUR/USD moves in Asia and remains contained so far this morning by $1.6050 offers. The UK outlook remains poor and even the IMF recommended easing up on the fiscal squeeze last week, but it remains to be seen if the Chancellor takes heed. In the meantime, cable direction will mirror Spanish bailout expectations, and with a broad expectation that risk demand will follow any announcement, the pound should remain supported on dips for now. Sterling shorts should therefore be seen through the cross in the short term
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