Overnight Points of Interest
# Australian Retail Sales
# Australian Trade Balance
# UK House Price Index
# UK Official Cash Rate Vote
# ECB Cash Rate Decision
# The provision of cheap liquidity, and indeed the spectre of more at tonight’s ECB meeting (we don’t expect any further measures, rather more assurances of ‘whatever it takes’), pushed the EuroStoxx600 to within 0.1% of 6 year highs. The Stoxx rose 0.57% on the day as the commodity sector rebounded, underpinned proceedings. In U.S. trading it was a case of another day, another mild rally, the action entirely consistent with the historical readings of bull markets. Energy lead the way with the small cap Russell 2000 index also outperforming. Since the GFC lows the Dow has now risen 173% and the S&P500 206%. The end of quantitative easing has not proved to be the headwind many thought it might. The S&P is up 0.28% with an hour to go.
# The pan-European Services (non-manufacturing) PMI came in a moderately weaker at 51.1 versus 51.4 previously. Despite the gauge recording only a mild fall the reading is very disconcerting as the index is now at 16 month lows. The survey is a forward looking indicator in as much as the responses by business chiefs turn into actions down the track. The breakdowns within the report reverted to type, the UK version surprised on the topside, jumping to 58.2 vs 56.5 expected. On the mainland, France unexpectedly slipped lower to 47.9 (contraction again), Germany fell to 16 month lows and Spain disappointed to with the lowest reading in a year. Italy surprised with a much better reading.
# The comparative U.S. reading, the ISM survey of the nonmanufacturing sector expanded by more than expected in November though hiring slowed. The Institute for Supply Management's nonmanufacturing purchasing managers index rose to 59.3 from 57.1 in October, higher than expectations for a reading of 57.6.
# No surprise then that the USD was broadly stronger and the EUR the underperformer, falling to a 2 year low. So far this week we have seen the JPY fall to a 7 year low, the AUD to fresh 4 year lows and now the EUR pushing to new significant lows. The mega USD trend is still in play then, contrary to our recent thoughts that the initial phase may have been somewhat mature (on the historic build-up of record long USD positions).
# The Fed’s beige Book survey, a report of anecdotal information on business activity collected from contacts nationwide on or before 24 November, showed US economic activity continued to expand in October and November, with lower gasoline prices boosting consumer spending. The report is in line with manufacturing and employment data that have suggested the economy was weathering slowing global demand. The survey found that employment gains were widespread across the districts. Strengthening labour market conditions had resulted in employers in some districts struggling to retain key workers as well as fill job openings in sectors such as information technology, engineering, legal and health services, manufacturing and transportation.
# U.S president Obama said weakness in economies in Japan & Europe could impact US economy.
# Japan Media polls project PM Abe’s coalition may keep 2/3 majority in Dec 14 lower house election.
# Commodities bucked the strong USD trend, Gold rose 1% to US$1,210 whilst Crude was mixed with Brent off a touch but WTI up equally. Regarding Crude the WSJ reported that Saudi Arabia sees oil prices stabilizing at USD 60 barrel. # WTI Crude futures rose 0.6% to $67.31 a barrel. Crude has slumped nearly 38% since June 20, which marked its 2014 high.
# The closely watched ADP private payrolls reading increased by 208,000 in November. Economists had expected payrolls to increase by 223,000. The report showed the lowest number of hires since August.