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Asian Session - Dollar Regains Some Confidence Amid Continued Morosity
Market Brief
No great surprises hit the markets yesterday. The end of an extended furlough in many of the major markets probably contributed to a respite in the markets. There were movements nonetheless. The dollar continued to enjoy the favors of investors who appreciate the Fed’s reaction in face of the troubles the US economy is facing. The dollar moved higher versus the euro to $1.5480 and against the yen at 103.65. The resilience of the greenback was also seen against the Swiss franc at SFr 1.0465. Yet one should not forget that the dollar remains a weak currency. US treasuries no longer benefit from the zero risk advantage they were known for. Operators have now to reckon with Treasuries have volatility risks curves with regard to these US Treasuries. Notwithstanding this the dollar continues to benefit from investors’ confidence amid the Fed’s reaction before the stagflation that seems to grip the US economy.
In the US equity market, Monday saw trading gains, despite light volumes. The DJIA, S&P500 and NASDAQ both closed higher by more than 1%. Nine of the ten sectors were higher on the day, with only Energy (-0.2%) coming under pressure, as crude sold off a couple dollars. Investors were encouraged to buy as FedEx warned of bad news surging +0.1% on Friday evening, and a large loss announced by MBIA, rising by 4.5%. Consumer Discretionary (+2.1%) led the market higher, while Materials (+1.9%) and Financials (+1.7%) were in supporting roles.
In Asia stocks are higher this morning, with the Nikkei up 1.5%, the Hang Seng was higher by 0.7% and the MSCI A-P is higher by 1.0%. Tech companies and auto makers led gains, after profit numbers from Fujitsu and Isuzu Motors boosted sentiment on the robustness of earnings. St George Bank had its largest ever rise, after the bid by Westpac Banking Corp. HSBC was higher in HK after its results were out yesterday, as it set aside less-than-expected for US bad loans. China has instructed mines, chemicals plants and oil wells to halt output after the large earthquake took place yesterday. Elsewhere, the New Zealand dollar declined yet again. The reason was a poor showing of housing data that dropped to their lowest level in sixteen years. Along with this figure came disappointing figures for employment for March. There is now a growing sentiment that the Reserve Bank of New Zealand will have to cut interest rates. As a result the kiwi fell against the dollar.
In Europe, the pound recovered after the producer price index showed increasing signs of inflation, thereby stifling any expectations that there would a be a rate cut in the near future. Investors were still worried about how the Bank of England was going to tackle the problem of this price rise along with growing signs, from other source of data that the economy is slowing down. Nonetheless the latest spate of data will probably hold the Bank’s hand from taking any action on interest rates. Though analyst still expect a rate cut by June it has now been thrust in the realm of speculative guessing.
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