{"id":59502,"date":"2012-02-15T08:34:39","date_gmt":"2012-02-14T21:34:39","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2012\/02\/15\/the-overnight-report-risk-appetite-retreating\/"},"modified":"2012-02-15T08:34:39","modified_gmt":"2012-02-14T21:34:39","slug":"the-overnight-report-risk-appetite-retreating","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2012\/02\/15\/the-overnight-report-risk-appetite-retreating\/","title":{"rendered":"The Overnight Report: Risk Appetite Retreating"},"content":{"rendered":"

\n\tBy Rudi Filapek-Vandyck<\/span><\/p>\n

\n\tThe Dow Jones Industrial Average managed to add 4.2 points, or 0.03%, to 12,878. The S&P 500 fell 1.3 points, or 0.09%, at 1351. The Nasdaq<\/span> was up less than a point, or 0.02%, at 2932.<\/p>\n

\n\tLet's put a figure to it. Sixty six percent of global market participants is waiting for a "correction". Not only has the rally since September lows pushed US equities some 20% off their trough, nobody has participated (there was the annual break in between) and according to chartists significant technical resistance is hanging in front of the rally. Meanwhile, negative news headlines continue unabated (yesterday was no exception), but all in all buyers continue to move in whenever weakness presents itself and that scenario proved no different overnight with US indices recovering most of their losses in the last hour of trade.<\/p>\n

\n\tWhat to make of it all?<\/p>\n

\n\t"Bulls beware: This is the first sign of a correction" one of the emails in my inbox warns this morning. I disagree. I think the correction already started last week and equities are treading water this week. One glance at a price chart for the S&P500<\/span> shows the steadily climbing-the-wall-of-worry upswing for equities has stalled in February. It is even clearer on a chart for the ASX200<\/span> in Australia. Maybe the best indicator around these days is AUD\/USD?<\/p>\n

\n\tWhat should have caught everyone's attention is the apparent divergence between currencies, commodities and bonds, which are all indicating risk aversion is making its come-back, while equities are refusing to budge.<\/p>\n

\n\tThe most important news from last night came from Japan where the central bank added JPY10trn<\/span> (as in: trillion) to what is now commonly known as "QE". As this is about 130bn<\/span> in American dollars, it really is a surprise risk assets did not perform better last night. To be honest, all this extra liquidity that is being pumped into the global financial system through central banks buying government bonds carries the smell of desperation. What it does mean, in my view, is that global equities are unlikely to fall much during corrections. Abundant liquidity tends to lift all boats, small and big, shabby and solid. I should know. I live close to the beach.<\/p>\n

\n\tCurrency traders, and there are many more today than pre-2007, love this kind of action. The Yen has been hit by weakness on the announcement, as expected. The currency eased from 77.80 yen per US dollar to JPY78.50 and was near JPY78.45 in late US trade. The Euro fell from highs near US$1.3210 to US$1.3075, and was near US$1.3090 in late US trade. The Aussie dollar fell from highs around US107.25c to US106.25c, and was near US106.35c in late US trade.<\/p>\n

\n\tCurrencies are indicating risk aversion, but thus far equities are refusing to pay attention.<\/p>\n

\n\tIn Europe, ratings agency Moody's joined Standard & Poor's with a mass-downgrade for European sovereign nations, accompanied by a warning for the few AAA-rated nations left; France, the UK and Austria. Assuming this trend will continue (and let's be honest, this probably will go on and on and on) Europe will ultimately be left with only one AAA-rated nation left standing; Germany. For now, Moody's did not downgrade, nor warn about the European Financial Stability Fund's AAA-rating.<\/p>\n

\n\tLast night's news headlines were mixed at best, and probably biased to the negative. The Greek tragedy wrote another chapter (surprised anyone?) with European ministers of finance forced to abandon their scheduled meeting today in exchange for a telephone hook-up if and whenever ongoing negotiations with the Greek government finally resolve in a solution everybody can be happy about. Note that Greece will default, one way or another, at some point, which will make the current tragedy even more tragic further down the track.<\/p>\n

\n\tUS retail sales for January disappointed with a 0.4% gain, half the 0.8% rise expected by market consensus. However, it turned out the details were not as weak as suggested by the headline as much of the weakness came in autos, which saw a 1.1% decline following strong growth in the previous month. This is in contrast to strong unit sales figures for the month. The detail showed a strong increase in food and beverage sales, in sporting goods and in general merchandise stores. More stimulus from the mild weather? Note that in the US retail sales includes gasoline sales and these were up 1.4%, largely reflecting price increases.<\/p>\n

\n\tEarlier on the day, the German ZEW<\/span> index of consumer sentiment surprised with a surge to +5.4 from 21.6 in February, a ten month high. Regardless, the ongoing Greek tragedy and disappointing US retail sales were simply too much for bourses<\/span> to bear. The FTSEurofirst<\/span> index fell by 0.2%, with the UK FTSE down 0.1% while the German Dax<\/span> gave back 0.2%.<\/p>\n

\n\tUS treasuries rallied on Tuesday (yields lower) as the disappointing US economic data resulted in investors being more cautious on the US economic recovery. US 2yr<\/span> yields fell 1pt<\/span> to 0.29% and US 10yr<\/span> yields fell 6pt<\/span> to 1.922%.<\/p>\n

\n\tUS crude oil prices fell on Tuesday but Brent crude prices recorded modest gains as the March contract neared expiry and supply threats in the Middle East kept the contract well bid. Nymex<\/span> oil fell by US17c<\/span> or 0.2% to US$100.74 a barrel while London Brent crude rose by US24c<\/span> to US$118.17 a barrel.<\/p>\n

\n\tBase metal prices were mostly weaker with the exception of aluminium<\/span> which booked a small gain (0.2%). Gold is going through its own mini-crisis with prices dropping for the third straight session on Tuesday. Comex<\/span> April gold dropped US$7.20 to US$1,717.70 an ounce. Apparently, the precious metal doesn't look too good on price charts.<\/p>\n

\n\tIn line with bonds and currencies, commodities are also indicating risk appetite is retreating.<\/p>\n

\n\tAssuming this pull back will gain some strength in the sessions ahead (nothing is certain in life, let alone in financial markets), the immediate focus of buyers and sellers will then likely shift to the 1300 level for the S&P500<\/span> where trenches are waiting for a what might develop in a fierce battle.<\/p>\n

\n\tIn Australia, the reporting season hasn't provided much to get excited about yet and today's interim profit results release by CommBank<\/span> ((CBA<\/span>)) is not anticipated to deliver the turnaround. Instead, banking analysts have been preparing stockbrokers' clients the bias is towards subdued sales growth with pressure on margins and little joy to be expected in terms of guidance for the full year. National Australia Bank ((NAB)) already disappointed with its trading update. Will CBA<\/span> follow suit today?<\/p>\n

\n\tToday's looking pretty busy on the calendar with motor vehicle sales, lending finance, and consumer sentiment being released in Australia on top of corporate profit results by the likes of. Domino's Pizza ((DMP<\/span>)), Westfield ((WDC<\/span>)), Fortescue<\/span> Metals ((FMG<\/span>)) and Dexus<\/span> Property ((DXS<\/span>)). In the US, industrial production, NAHB<\/span> housing market index and FOMC<\/span> minutes are scheduled for release.<\/p>\n

\n\t <\/p>\n

\n\tAll overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX<\/span> and more available in the FNArena<\/span> Cockpit.  Click here<\/a>.<\/em><\/p>\n

\n\tAll paying members at FNArena<\/span> are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

A late rally pushed US equities back to small gains at the close, but currencies, bonds and commodities were not so lucky. (Accessible only for subscribers before 10:15 AEDT)<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[84],"tags":[46],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/59502"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=59502"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/59502\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=59502"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=59502"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=59502"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}