News

Global markets react strongly to US job growth

A better than expected outcome in US Non-Farm Payrolls data on Friday has spurred markets across the board into rally mode. Unemployment fell to the lowest level recorded in three years to 8.3% and provided a strong signal the US economy was fighting its way out of contraction. Coupled with signs of progress out of Greece investors pushed risk assets higher and postulated doubt over the possibility long term bond yields would remain low for an extended period of time.

Locally the Australian dollar performed well however with all eyes on the RBA board meeting tomorrow we may see some profit taking late in the afternoon session. Consensus dictates a 25 basis point cut is imminent however the cautions the FOMC and ECB have publically announced in their recent board meetings might mean a decisive 50 point cut helps to ease any future tensions which Australia might be in for as result of further global contraction.
Posted 05 February 2012 (by Curve Securities)

Markets bide their time?

Still no deal in Greece as creditors await the joint verdicts from the EU, IMF and ECB as the countries long term debt sustainability outcomes before any firm pact is made.
Investors downplayed the ongoing stalemate preferring to sit on the sidelines ahead of tonight?s all important US Non-farm Payrolls release. The recent positive data in the manufacturing sector was slightly offset by the production sector hence this figure provides a key piece of economic growth puzzle.
Posted 02 February 2012 (by Curve Securities)

Manufacturing boosts market confidence

Key manufacturing data in the US, Europe and China lifted markets across the board overnight. Stocks commodities and risk currencies all proved beneficiaries of the growth in the US Institute for Supply Management numbers posted on Wednesday. A rise to 54.1 indicated the strength in the US manufacturing sector lead by construction.

German growth also proved positive territory for the first time since September and UK manufacturing data grew for the first time in 3 months.
Posted 01 February 2012 (by Curve Securities)

Softer US economic data sways investor confidence

US consumer confidence suffered an unexpected fall as households bore the brunt of higher gas prices and weaker job opportunities over the winter. A glitch in the positive data flow out of the US enabled investors to take profit as stocks and commodities edged lower overnight.

In Europe no news on the Greek debt resolution caused further investor angst as the March deadline approaches to refinance bonds. A protracted delay could see more ammunition for financial market swings over coming days.
Posted 31 January 2012 (by Curve Securities)

Greece dampens investor enthusiasm

A delay overnight in announcing a solution between Greek creditors and the Government was a disappointment for investors as the market anticipated a resolution to be fast approaching. The stalemate was touched on by German Chancellor Angela Merkel in talks last night revealing the banks had not committed to any deal. Plans to appoint a commissioner to expedite a swift resolution were quashed by Greek finance minister Venizelos.

Locally we have business data released for December detailing confidence and condition expectations. Also private sector credit data will provide a little insight into how the ?cautious consumer ? is coping with the current evolving conditions.
Posted 30 January 2012 (by Curve Securities)

Hiccup in US Econony growth

Economists were expecting the US economy to report annualised growth in Q4 around 3.0% however 2.8%, up from 1.8% was still slightly disappointing news. Consumer spending looked better growing 2.0% hence markets were marginally moved.
In Europe sources revealed a solution was closer to finalisation on the impending debt resolution for Greece's refinancing issues.
Posted 29 January 2012 (by Curve Securities)

US FOMC commits to low interest rates until 2014

Global risk markets were the beneficiary on Thursday as the Fed committed to bolstering economic growth by extending their initial horizon of low interest rates by 18 months. Their pledge ensures rates will remain low until late 2014 indicating a protracted 3 year recovery is now expected.


Stocks, commodities, risk currencies all rose on the news with our Australian dollar hitting a 3 month high of 106.86 and the Euro showing strength. Data out of Europe was not all bad either as Italy was able to issue bonds at lower borrowing levels than last year?s auction. Greece is also committed to an agreement with its private creditors to ensure they receive the IMF bailout package ahead of the March maturity of 14.5 billion euros in debt.
Posted 26 January 2012 (by Curve Securities)

A Greek tragedy?the breakdown in debt negotiations continue. Aussie Q4 CPI today

Greek creditors are unwavering on their demand for a 4 per cent coupon on the refinancing of 14.5 billion euros in bond redemptions falling due in March, meanwhile the government of Greece is not willing to pay more than 3.5 per cent potentially to the detriment of its private creditors. The stalemate weighed on international markets over night as both stocks and commodities lost traction. The IMF forecast grim warning of economic contraction of up to 2 per cent if the European debt crisis was not curtailed soon.


Consensus among market forecasters this morning in relation to the Q4 CPI released is +0.5% QoQ and 2.4% YoY. In our view a 25 basis point rate cut in two weeks is imminent however a deviation from the consensus Q4 CPI figures could mean that a 50 basis point cut is required for flow through effects to impact the economy in the required areas.
Posted 24 January 2012 (by Curve Securities)

Flat markets reflect short-term uncertainty - day two

Amidst a back drop of IMF warnings and continued Greek debt negotiations markets remained cautious and posted unassuming relatively flat closes. The Aussie dollar notched a little higher at 1.0541 this morning opportunistically as other markets merely hovered.

Calling for a ?comprehensive solution? to tackle the Euro debt crisis, IMF chief Christine Lagarde called for a larger firewall to prevent global contagion effects immersing the entire Euro Region. Proactively Euro zone finance ministers have sent back a proposal initiated by private financers of Greek bonds and the Greek government demanding a lower refinance rate by achieved before further financial assistance is provided. The official debt to GDP ratio of 120 per cent is hoped for by 2020.
Posted 23 January 2012 (by Curve Securities)

Flat markets reflect short-term uncertainty

The US and European markets posted a small rise and a small decline respectively on Friday evening indicating the mixed sentiment underlying investor confidence at the moment without any headline data releases to provide a conduit to market moves.

The week ahead will certainly offer some direction as debt talks continue between private creditors and Greek officials on how best to restructure the 360 billion euro liabilities weighing heavily on the struggling Euro Region. Without an internal solution to the write down of loans or re issue of bonds Greece will not be able to secure 130 billion euro in the promised IMF aid package.

The week ahead in Australia may also shed some light into our two-pronged economy with Q4 CPI released on Wednesday. A low number may give the RBA the impetus to react strongly with a fifty point cash rate reduction however our base case remains a quarter per cent Tuesday week. No key data today.
Posted 22 January 2012 (by Curve Securities)

Investor confidence flows with continued positive data

US weekly jobless claims fell overnight and once again provides further pieces of evidence the US economy is in an upward trend towards growth and activity. Supported by stronger housing and manufacturing data investors moved confidently into stocks pushing global markets higher. Europe also provided the incentive for a positive close to the week for us with both Spanish and French bond auctions performing well since the S&P downgrade.

The Aussie labour force data yesterday headlined a lower overall unemployment rate of 5.2% but on closer inspection the fall in overall employment by 29,300 signals more poor jobless data to come next month and supports our view that a 4% cash rate is imminent irrespective of yesterdays outcome.
Posted 19 January 2012 (by Curve Securities)

IMF seeks an extra 500 billion euro in lending capacity?Australian labour force release today

The World Bank yesterday announced another gloomy forecast for the year ahead dropping global growth forecasts down to 2.5% with Europe expected to contract another 0.3%. Their commentary also included predictions of a slump far outweighing the 2008/09 GFC. IMF managing director Christine Largarde signalled the intentions of the board to seek an extra 500 billion euro in lending capacity to ??help defuse the current global economic weaknesses and regional challenges?."

Today we receive December labour force data consensus forecasts implying a stable unemployment rate and a slight increase in the overall employment number. Any negative move in this figure will most likely give rise to the RBA acting on February 7 to reduce the cash rate further. Given the spate of job cuts announced in the banking sector of the last few it is out view that a 4% cash rate is imminent irrespective of todays outcome.
Posted 18 January 2012 (by Curve Securities)

Better than expected data across Asia, US and Europe spark optimism in the short end

The Chinese GDP release surprised on the up side and sparked a sell off in interest rates yesterday afternoon as median forecasts of 8.7% were brushed aside in a Q4 increase of 2.0%, 8.9% YoY. A positive boost to global markets and further enhanced by the US Empire manufacturing Survey for January (up 13.5, median 11.0). Continuing the trend in Europe the German ZEW Survey showed a dramatic improvement in January couple with a positive Spanish and EFSF bills auction investors weighed into currencies, commodities and equities.
Posted 18 January 2012 (by Curve Securities)

S&P downgrades the sovereign risk of nine Eurozone countries?Aussie market prices in further rate cuts

France and Austria both lost their AAA ratings as S&P announced their December review findings on Friday night. Germany held on to their AAA status however Portugal, Italy, Spain, Cyprus were all relegated to junk with a two notch downgrade and Malta, Slovenia and Slovakia suffered a one notch hit.

An S&P statement release cited that "?Today's rating actions are primarily driven by our assessment that the policy initiatives that have been taken by European policy makers in recent weeks may be insufficient to fully address ongoing systemic stresses in the Eurozone?"

A significant roll on effect to the global financial situation will be how the Economic Financial Stability Facility (EFSF) will continue to function to support the efforts of struggling European Governments. The 440 billion euro fund essentially only has 250 billion euro remaining after it came to the aid of Portugal and Ireland recently. The EFSF does not have the resources to assist Spain or Italy should they also need aid in concurrence.

As a local take on the current situation, of significant concern to the RBA in Decembers Board Meeting was the recapitalisation of European Banks in the next six months. With Eurozone sovereign risk now deemed of lower credit worth among their global lending partners it seems the situation may still get considerably worse. This is both a concern to the Australian markets and hence the RBA with market makers implying two or more rate cuts over the next six months.
Posted 16 January 2012 (by Curve Securities)

Roles reverse as positive European news offsets weaker than expected US data

Italy and Spain successfully reduced borrowing costs overnight via a 12billion euro bills auction and a 10 billion euro 1 year offering respectively by both countries. The successful issue well below their December auction outcomes and provided much needed optimism for the region to close out the week.

The ECB also signalled they were pleased with their long term refinancing operations (LTRO) currently in place which provide Euro Zone banks with discount loans. These provisions along with substantial liquidity measures have improved the level of confidence to the region at the start of the New Year and it is up to the regions Governments to leverage from these measures to resolve the burgeoning debt crisis. The ECB kept interest rates unchanged last night after two consecutive cuts.

Weaker than expected retail sales in the last month of 2011 and a slight rise in jobless claims left investors feeling slightly cautious about the extent to the recovery taking place in the US. It is obvious their will be obstacles to the progression in the economy and most markets closed slightly higher on the prospect of such improvement.
Posted 13 January 2012 (by Curve Securities)

Q4 2011 German GDP lower, evidence Europe is likely to have fallen into recession

The European production engine of Germany suffered a quarter per cent contraction in Q4 last year pointing towards a strong likelihood the Euro Region had also fallen into recession in 2011. Germany is seen as the mechanism for growth in the region and poor data released last night has confirmed investor perception. Despite this news the 5 year bund auction was well received with an almost 3 times bid to cover ratio producing a 0.9% yield, 0.21% lower than last month.

The Fed?s Beige Book estimates on growth were summarised as ?modest to moderate? for Nov/Dec as household expenditure was dampened by poor new labour hiring stats and weaker housing data.

With three weeks to go for the Reserve Bank of Australia?s board meeting, 15 out of 20 economists surveyed by Bloomberg are indicating a further cash rate reduction 0.25% will be instigated. The interbank funding market has been fairly flat across the curve at the start of the year but trader expectations of 3.38% priced into the June bill futures is likely to change things quite soon in the short term.
Posted 12 January 2012 (by Curve Securities)

Strong commodities imports for China boost global optimism?Fitch not concerned with France

Trade data released yesterday for China indicated a boost in demand for commodities including copper and iron ore (up by 48% and 11% respectively) and provided a welcome relief to the global doom and gloom which had started to weigh on markets so early in the year. Once again positive momentum in the US through stronger business expectations for December led stocks to close higher. Europe also rose as Fitch announced they were unlikely to downgrade France?s sovereign credit rating.

In Australia building approvals were higher than forecast led by apartment approvals up 16%. Today the W-MI Consumer sentiment is released.
Posted 11 January 2012 (by Curve Securities)

Germany heralded as a safe port amidst European debt storm

Investors flocked to lend Germany their short term surplus cash overnight as the 3.9 billion euro 6 month treasury billion auction returned an interest rate of -0.0122%. This means that investors were willing to receive a negative interest rate in order to ensure their money was held ?safely? in Europe. European banks are also hesitant to lend to each other of late and are preferring to run up larger Exchange Settlement Balances with the ECB.

French President Nicholas Sarkozy acknowledged ??the situation is tense, very tense?? Last nights talks between Germany and France have not made a huge impression on markets without specific details being publically released. Markets closed mixed as a result ? US slightly higher and Europe slightly lower.
Posted 10 January 2012 (by Curve Securities)

US unemployment rate lowest in 3 years?Australian retail sales released today

The market appears to be waning despite the continuation of supportive US economic data again on Friday. Lack lustre indices closes highlight investor caution stemming from poor European news despite US non-farm payrolls topping forecasters expectations rising 200k. The unemployment rate fell to 8.5% (from 8.7%) and is the lowest since February 2009.

Today in Australia we expect November retail sales ? consensus +0.3%.
The RBA meets for the first time in 2012 next month and will need to once again assess the domestic situation on one hand and the global momentum on the other. A growing caucus of support is rising for another 25 basis point cut to ensure the Australian economy is not put under strain in the future.
Posted 09 January 2012 (by Curve Securities)

US Financials rally as European Banks face rising balance sheet pressure

Positive data continued out of the US last night reporting a much higher expansion of company payrolls in December last year and providing further evidence that the US economy is improving. Investors have favoured US bank stocks citing improved balance sheet positions and a distancing from European ventures has triggered a re-look at value potential.

On the flip side European financials experienced another down day as the balance sheet adjustments continue to take shape. UniCredit faced the unrelenting fall out from its deep discount share offer lowering the share price by 30 per cent in the aftermath. Pressure on Spain and France remain very real as capital holds the key for survival amid the back drop of this latest debt crisis.

Yesterdays Australian trade data revealed lower export volumes to China for iron ore and coal coming down from their highs however overall exports and imports were nominally flat.
Posted 06 January 2012 (by Curve Securities)

Europe?s debt markets still simmer with uncertainty while the US economy gains momentum

Italy?s largest bank, UniCredit, suffered a blow overnight with its share price falling close to 10 per cent as it increased its share offerings by 7.5 billion euros at a deep discount in move to stabilise its balance sheet. A weaker than expected German bund auction and continued fears credit markets remain tight within the Euro Region seemed to disconcert investors and markets closed mixed overnight.

US factory goods new orders rose in November pointing to further US growth momentum and provided the back drop for investors to support the New Year optimism.
Posted 05 January 2012 (by Curve Securities)

An encouraging beginning to 2012 as US data impresses

A promising beginning to 2012 for global bourses overnight was triggered by an upbeat assessment of the recovery progress in the US as data revealed manufacturing activity and construction spending improved over December.
Europe supported the US lead preferring to focus on the positives of German manufacturing as opposed to suspicions France may soon be downgraded by S&P.

Our local markets are expected to also follow the upbeat trend as no key data is expected today.
Posted 04 January 2012 (by Curve Securities)

Focus For The New Year

Obviously Europe will feature prominently on the financial market radar, particularly with significant European debt to be refinanced. Italy has managed to muddle through a debt issuance program over the last week but with 10-year debt being issued at what many see as unsustainable levels urgency for a solution remains. It may get to the point that to save the Euro, Greece must be set free as a 'sacrificial lamb'.

Focus has been momentarily diverted however by Iran who provocatively launched two test missiles as part of a military exercise. Concern mounts over what they might do with the Strait of Hormuz, through which 40% of the world's oil is shipped.

On a rosier note production figures coming out of China last Friday were reasonably positive. The HSBC Manufacturing PMI index for December was revised up to 48.7 from the prior 47.7 estimate and the official Manufacturing PMI index came out at a better than expected 50.3. India's Manufacturing PMI for December was also much stronger, up from 51.0 to 54.2. Obviously if Europe is to falter it?s crucial for these two emerging powerhouses to keep pumping away.
Posted 01 January 2012 (by Curve Securities)

Markets rally around US positive data on the eve of the last trading day before Christmas

Investor sentiment was bolstered overnight by the release upbeat consumer confidence figures and 3year low US jobless claims. The US dollar and Treasury bonds rose on the news that US GDP expanded slightly slower than the 2% consensus growth projection at 1.8% however global equities maintained the optimistic sentiment to close.

With Australia?s last trading day before Christmas upon us markets are expected to be then and centred around the positive rally.
Posted 23 December 2011 (by Curve Securities)

European Central Bank provides 490million Euro Christmas present

European banks were the beneficiaries of a boost to their liquidity overnight as the ECB offered reduced rate 3 year loans to ease funding pressures. It was reported that 523 banks took up the offer topping analyst forecasts of around 310 billion euros. A welcome relief in the short term however a long way from the end to this current debt crisis.

Moodys reaffirmed Australia?s AAA credit rating commenting, "?Economic resiliency is demonstrated by the country's very high per capita income, large size, and economic diversity??
Posted 22 December 2011 (by Curve Securities)