ETX Capital Daily Market Bite, 21st May, 2013: European Markets Choppy On Fedspeak; Rand Hit
May 21, 2013 11:15 am
May 21st 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist
European stocks are still tossing between mild gains and losses in a choppy session with a lack of meaningful economic data to offer fresh direction. Stock traders are still digesting comments by Fed member Charles Evans overnight; he said the US recovery can be self-sustaining by 2014 but expressed caution about the nature of this recovery as any signs of pick-up could be temporary, suggesting the Fed is not ready to unwind stimulus just yet but perhaps within the next year.
Fedspeak is the word today, with members Bullard and Dudley speaking later this afternoon about monetary policy ahead of Federal Reserve Chairman Bernanke’s testimony before the Joint Economic Committee of Congress on Wednesday and minutes from the Fed’s last policy meeting. Stocks aside, the FX market is the major mover today with the yen continuing its downward spiral after some respite in the previous session.
Japan’s economy minister Amari on Sunday said the yen’s correction was largely over but overnight in Asian trade, he back paddled by downplaying his remarks, saying he is uncertain about the yen’s correction. The BOJ meet early Wednesday to decide on rates and Amari’s comments which lifted the yen are may have not been welcomed by the central bank as it looks to continue aggressively pump stimulus into the economy.
Over in South Africa, dropped sharply against the US dollar to fresh four and half-year lows. Fresh fears over the escalating tensions in the mining labour market ahead of talks over salaries has smacked the ZAR again following Monday’s weakness. The weakness in gold prices adds pressure on the ZAR, threatening a further flare-up in tensions. Today, we have heard reports that 10 striking miners at a chrome mine in South Africa have been admitted to hospital after clashes with security guards, fuelling the worries about tensions on the rise and weakening the rand further.
Over the weekend, the NUM called for pay hikes of up to 60% from mining companies but with these demands are likely to be denied due to the hefty costs mining companies have had to pay on the back of mining closures and loss of production in last year’s labour market tensions. Traders are worried about a repeat of last year’s tensions in the labour market which lead to widespread violence and the death of 50 people. An escalation of these tensions will inevitably cause a significant amount of pain to the country’s mining companies which are struggling with falling commodity prices, soaring capex and a weakening South African economy. For that reason, the timing of this latest flare-up could not be any worse.
Elsewhere, UK inflation moderated which was welcome news but Germany’s PPI fell more than expected; both reports did little to hit stock markets but we did see weakness in sterling following the decent inflation figures. UK CPI moderated to 2.4% year-on-year in April from 2.8% the previous two months, moving close to the 2% target rate the BOE would like to see it at. In Europe, peripheral bond yields are calm following news that Spain sold bills at the top end of its targeted €2.5B-€3.5B range with the bid-to-cover improving.
ECB member Liikanen was also speaking — he said the ECB should keep an open mind on all policy measures. His comments came in response to a question about suggestions that the ECB could purchase ABS. Liikanen also reiterated that the ECB is seriously considering measures to help boost lending to SMEs. US stocks are expected to open broadly flat with attention on earnings from Home Depot and Best Buy
May 21st 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist
European stocks are still tossing between mild gains and losses in a choppy session with a lack of meaningful economic data to offer fresh direction. Stock traders are still digesting comments by Fed member Charles Evans overnight; he said the US recovery can be self-sustaining by 2014 but expressed caution about the nature of this recovery as any signs of pick-up could be temporary, suggesting the Fed is not ready to unwind stimulus just yet but perhaps within the next year.
Fedspeak is the word today, with members Bullard and Dudley speaking later this afternoon about monetary policy ahead of Federal Reserve Chairman Bernanke’s testimony before the Joint Economic Committee of Congress on Wednesday and minutes from the Fed’s last policy meeting. Stocks aside, the FX market is the major mover today with the yen continuing its downward spiral after some respite in the previous session.
Japan’s economy minister Amari on Sunday said the yen’s correction was largely over but overnight in Asian trade, he back paddled by downplaying his remarks, saying he is uncertain about the yen’s correction. The BOJ meet early Wednesday to decide on rates and Amari’s comments which lifted the yen are may have not been welcomed by the central bank as it looks to continue aggressively pump stimulus into the economy.
Over in South Africa, dropped sharply against the US dollar to fresh four and half-year lows. Fresh fears over the escalating tensions in the mining labour market ahead of talks over salaries has smacked the ZAR again following Monday’s weakness. The weakness in gold prices adds pressure on the ZAR, threatening a further flare-up in tensions. Today, we have heard reports that 10 striking miners at a chrome mine in South Africa have been admitted to hospital after clashes with security guards, fuelling the worries about tensions on the rise and weakening the rand further.
Over the weekend, the NUM called for pay hikes of up to 60% from mining companies but with these demands are likely to be denied due to the hefty costs mining companies have had to pay on the back of mining closures and loss of production in last year’s labour market tensions. Traders are worried about a repeat of last year’s tensions in the labour market which lead to widespread violence and the death of 50 people. An escalation of these tensions will inevitably cause a significant amount of pain to the country’s mining companies which are struggling with falling commodity prices, soaring capex and a weakening South African economy. For that reason, the timing of this latest flare-up could not be any worse.
Elsewhere, UK inflation moderated which was welcome news but Germany’s PPI fell more than expected; both reports did little to hit stock markets but we did see weakness in sterling following the decent inflation figures. UK CPI moderated to 2.4% year-on-year in April from 2.8% the previous two months, moving close to the 2% target rate the BOE would like to see it at. In Europe, peripheral bond yields are calm following news that Spain sold bills at the top end of its targeted €2.5B-€3.5B range with the bid-to-cover improving.
ECB member Liikanen was also speaking — he said the ECB should keep an open mind on all policy measures. His comments came in response to a question about suggestions that the ECB could purchase ABS. Liikanen also reiterated that the ECB is seriously considering measures to help boost lending to SMEs. US stocks are expected to open broadly flat with attention on earnings from Home Depot and Best Buy
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