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| Email Morning Report Monday 30 May 2011
Market wrap
The markets closed the week in a risk seeking mood. A meeting of G8 leaders said the global economy was strengthening, helping investor confidence. US data was as expected for personal spending, beat consensus for consumer confidence, but missed estimates for pending home sales. The S&P500 closed up 0.4%, and commodities were up 0.9% (CRB). Copper was 1.8% higher, and oil was +0.4%. US 10yr treasury yields closed off the day's low of 3.05% at 3.07%. Giant bond fund PIMCO's Bill Gross said German and Canadian bonds were better value than US treasuries.The US dollar under performed, the DXY index down 1.1%. EUR dipped to 1.4184 early London but gained thereafter to 1.4324, buoyed by an FT article saying EU banks could avoid parts of the Basel III capital accord. It opens in NZ this morning at 1.4325, untroubled by an article in Der Spiegel on Sunday claiming (and denied by the IMF) Greece had missed all its fiscal targets. The Swiss franc outperformed,
Economic wrap
USD/CHF falling from 0.8596 to 0.8465. USD/JPY fell from 81.30 to 80.70 after rallying early London on Fitch's revision of the country's AA- outlook from stable to negative. AUD rose from 1.0648 to 1.0717, trading to 1.0730 at the NZ open this morning. NZD failed to make further headway after touching 0.8200 on Friday afternoon, ranging between 0.8140 and 0.8193. AUD/NZD ranged sideways around the recent low, between 1.3060 and 1.3110.
US core PCE deflator up 0.2% in April. After running between 0-0.1% per month through most of 2010, this inflation measure has posted three out of fours 0.2% gains so far this year, though all have been a little below 0.2% before rounding. That provides further comfort that deflation risks have receded, although the accompanying personal spending figures were on the soft side of expectations. Spending growth was revised down a tick in March to 0.5%, and April's 0.4% was the equal lowest pace recorded since November last year. Personal income growth was steady at 0.4%.US pending home sales fell 11.6% in April, to the lowest level since September last year. The midwest, south and west all down saw sales drop sharply, but the northeast was up slightly. Very wet weather across the country and especially severe flooding in the south will have been a factor hitting sales but may not explain all the weakness. Sales are now down 27% on April last year, when the home buyer tax credit expiry saw sales jump temporarily.
US consumer sentiment was revised up 1.9 pts to 74.3 in the final Uni of Michigan read for May, roughly evenly split between the expectations and current components. Both 1 and 54 year inflation expectations were revised lower. These outcomes are consistent with the drop in gasoline prices over the past week or so.
Euroland confidence indicators weaker in May. The business climate index fell from 1.28 to 0.99, its lowest in six months, while economic confidence fell for the third month running, down 0.6 pts to 105.5 (from Feb's 108.0 peak). In April, money supply M3 growth slowed from 2.3% to 2.0% yr although loans to the private sector saw growth edge up from 2.5% to 2.6% yr. Mixed at the margin, still very weak overall.
German inflation slowed from 2.4% to 2.3% yr in May, but the EU harmonised measure fell from 2.7% to 2.4% yr, so Tuesday's Euroland CPI should certainly ease back.
UK consumer confidence jumped from -31 to -21 in May, the biggest jump in 18 years, though the Royal Wedding, sunny weather and the string of late April-early May bank holidays probably explained part or even much of the rise, beyond normal seasonal shifts. Other data included a 0.3% rise in house prices in May, according to the Nationwide, for a -1.2% yr annual pace.
.Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 30 May 2011. All customers please note that this information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. Australian customers can obtain Westpac’sfinancial services guide by calling +612 9284 8372, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change withoutnotice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is registered in England as a branch (branch number BR000106) and is authorised and regulated by The Financial Services Authority. Westpac Europe Limited is a company registered in England (number 05660023) and is authorised and regulated by The Financial Services Authority. © 2010 Westpac Banking Corporation. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.Daily Forex Market News
Market outlook
AUD/USD and NZD/USD outlook next 24 hours: The US and UK are on holiday today. AUD resistance today is at 1.0750, being a trendline since June. NZD's break above 0.8120 on Friday points to a test of the post-float high of 0.8215, with support now at 0.8120. The NZ trade balance for April provides minor event risk today.
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