IG trading wrap 13/3/13
TSE 6477 -34
DAX 7966 0
CAC 3835 -5
IBEX 8513 -19
DOW 14440 -10
NAS 2800 0
S&P 1551 -1
Asian markets have given up further ground today as a lack of positive drivers to keep the risk rally going has encouraged investors to lock in recent gains. The Nikkei, Hang Seng, Shanghai Composite and ASX 200 are all around 0.5% lower. Price action in equities seems to have plateaued after weeks of a relentless rally. Although it’s been one-way traffic in the equities space, the moves in the forex market have been a lot more interesting. AUD/USD was on a tear early in Asia, charging to a high of $1.0336 as it tracked the moves in the commodities space. However, the pair has since retreated into 1.031 after local home loans data disappointed. Analysts were expecting the data to show a 0.2% improvement, but instead it actually experienced a 1.5% fall. GBP/USD seems to be taking over as it rallies back above 1.49 after having dropped to a low of 1.4832 on the back of disappointing industrial output data. We still find it hard to get excited about the pound with policymakers happy to tolerate higher inflation in a bid to pursue growth. The budget presentation on March 20 is likely to reveal more about what measures leaders are looking to take to help the economy. EUR/USD has remained fairly sidelined through Asia and we suspect this has to do with Jens Weidmann, chairman of the Bundesbank, warning that the eurozone crisis has not ended. EUR/USD had a momentary spike to $1.3075, but swiftly reversed and dropped back into $1.3023 and has been sidelined through Asian trade. Later today we have European industrial production along with French non-farm payrolls and CPI to look out for. As a result, we continue to see disjointed moves in the risk currency space and it is likely to remain this way until the USD re-establishes its trend.
Japan is certainly the market to watch in Asia at the moment, having gone through some big swings already this week. We continue to feel buying the dips in USD/JPY and the Nikkei will be one of the more obvious trades out there this year given Japan’s pursuit of a 2% inflation target. Yen softness helped the Nikkei pop higher through most of yesterday’s session, but this didn’t last too long as USD/JPY gave up its highs. Some attribute this to misinterpretation of the Nikkei article which did the rounds yesterday, but it could have simply been a case of profit taking. There was also news that Japan’s largest opposition party rejected Kikuo Iwata’s nomination for central bank deputy governor. This weighed on the pair further and it is just holding on to 96 at the moment. We get the sense we could be in for another big day for the pair. Any rhetoric regarding Mr Kuroda or his deputies will be enough to cause some swings in the pair. To the upside, yesterday’s high of ¥96.71 will be the level to watch. However, for now the pair is barely managing to hold on to 96. After a quiet few days on the data front, the USD will be back in focus today with US retail sales, import prices, business inventories and the federal budget balance on the calendar. All this data will be used to reprice the USD, based on QE expectations. Should the data exhibit further strength, which most analysts are expecting, it won’t be long before USD/JPY pops higher again along with the Nikkei.
Tomorrow is a big day for the AUD and the local market with jobs numbers set to hit the wires. While the RBA remains comfortable with the current interest rate setting, many analysts feel unemployment should tick higher and surprise the central bank, which might force its hand into cutting. The RBA has already said it still has an easing bias, but we are unlikely to see it pull the trigger should unemployment remain steady, with no major alarm bells on the global macro front. Economists are expecting unemployment to tick up to 5.5% with 10,000 jobs added. The ASX 200 struggled from the onset today and has shed 0.6% to trade back below 5100. This has come despite a positive day for the resource names. Gold stocks have outperformed with the likes of Newcrest and Regis putting on around 2% in response to strength in the precious metal. The banks have finally buckled and are the biggest contributors to today’s losses. NAB has declined 1.8% despite announcing significant cost cutting measures. With Asia struggling, we are also expecting a subdued start for European and US markets.
Ahead of the European open we are calling the FTSE -34 6477, DAX 0 7966, CAC -5 3835, IBEX -19 8513.