AM Report 12th March 15

ajz

A tale of two continents overnight with risk sentiment in Europe diverging from the US and things far calmer overall than during the previous session…

European equities charged higher, without much real reason to do so (other than that boat load of ECB liquidity of course!) whilst US equities went a touch higher early, before rolling over late to go out with minor losses on the session lows.  Bond markets traded tightish ranges but in the US and Germany the curve kept flattening with the 7yr on out bid and Aussie futures broadly following this move, putting the 10yr on the upper edge of the recent downtrend ahead of unemployment data today.

The dollar index chart continued to roughly trace out the pattern of a space shuttle launch with EUR (which is ~58% of the index) driving much of this obviously. It is beginning to give the impression of a full scale capital flight now as it crashes through a big figure or so each day, closing at 1.0545 this morning (remember when AUD was trading around those numbers?!). The ECB are probably pretty happy with themselves right now but given the scale and speed of the move I have no doubt we will be hearing Japan-style ‘too far, too fast’ calls very shortly….

Outside of EUR the rest of the G10 were mostly shredded. The ones that did standout were NZD –The RBNZ left rates on hold this morning, leaving NZD with a huge intraday reversal and hammer on the chart, and CHF –Don’t mention to the SNB that USDCHF is just one big figure away from the level it was when they abandoned the EURCHF peg!
Commodities, like US equities, aren’t overwhelmed with joy about the dollar strength and yesterday’s sizeable miss in Chinese industrial production wasn’t much help either. Base metals were all 0.6-2.1% lower overnight, WTI continued to leak lower (though Brent rallied) and precious metals….look away if you are squeamish (or long against the dollar).

Australian Feb employment data is out today at 1130, expectations are for +15.3k & 6.4% but it will of course be the usual Bureau of Stats lucky dip. There is also a speech form RBNZ gov Wheeler just prior to this at 1110, then tonight German and French CPI, UK trade balance, US retail sales, US employment claims and a speech from BoE gov Carney at 2345.

The SPI closed at 5791, up 5pts. After yesterday today is going to be an interesting test since it probably needs to fill Tues-Weds opening gap down in the cash market to prevent a decent downside move. It may well do that today but yesterday at least, that seemed a bridge too far. Looking for a 5745 – 5805 range today.